The S&P 500 closed lower Tuesday as Federal Reserve kicked off its two-day meeting, which is expected to culminate in third rate cut for the year.

At 4:0 ET p.m. (21:00 GMT), the Dow Jones Industrial Average fell 178 points, or 0.4%, and the S&P 500 index was 0.1%, while the NASDAQ Composite slipped 0.1%.

Fed meeting kicks off as widely expected rate cut decision looms
The Fed got its latest two-day policy meeting underway, which investors are expecting will end with a cut to U.S. interest rates on Wednesday.

The chances of an easing from Fed's current target rate of 3.75%-4% now stand at roughly 89%, CME FedWatch has shown.

Still, with some policymakers recently flagging concerns around unveiling a third cut since September during a time when fresh economic data has been scarce because of a record-long government shutdown, this could prove to be one of the most contentious decision in years.

"There are now high expectations of a 'hawkish cut' at Wednesday evening's FOMC decision," said analysts at ING, in a note.

Data released earlier Tuesday has added to the potential that the FOMC policymakers try to play down expectations of another rate cut in the new year, as U.S. private payrolls increased by 4,750 on average per week in the four weeks ending on November 22, according to a weekly update of the monthly ADP National Employment Report.

Additionally, U.S. job openings increased marginally in October, rising 12,000 to 7.670 million, the Labor Department's Bureau of Labor Statistics said.

The BLS is due to release its closely-monitored nonfarm payrolls report for November on December 16, after it was delayed by a record-long U.S. government shutdown. The October unemployment rate will also never be known, after having hovered around a four-year high of 4.4% in September.

However, most eyes are likely to be on Nvidia (NASDAQ:NVDA) after President Donald Trump stated, via a Truth Social post, that he will allow the company to sell its H200 AI chips to approved customers in China and other countries, albeit with a 25% tariff and with restrictions to ensure U.S. national security.

Trump said he had informed Chinese President Xi Jinping of his decision, to which Xi "responded positively."

Nvidia's H200 chip was unveiled in 2023 as the successor to the company's H100 chip, and is estimated to be about six times more powerful than the H20, the most advanced AI chip that Nvidia is currently allowed to sell to China.

Nvidia chips are widely used by Chinese companies in AI development, with Trump's Monday announcement presenting a path for higher chip sales for the world's most valuable company.

Additionally, Warner Bros Discovery (NASDAQ:WBD) has another suitor, as just days after streaming titan Netflix (NASDAQ:NFLX) was named the winner of a bidding war for the studio, Paramount Skydance (NASDAQ:PSKY) said it had launched a hostile bid worth.

Source: Investing.com