The tepid performance came after a global advance stumbled in New York and Europe on Monday, with a below-par read on US services sector activity hinting at weakness in a key area of the economy.
Analysts also warned that, with the US borrowing ceiling now lifted, the Treasury is expected to unleash a flood of debt onto the market as it looks to restock its coffers, sucking cash from the financial system and putting pressure on liquidity.
Oil prices sank as the rally from Saudi Arabia's surprise output cut gave way to demand worries.
Sylvia Jablonski, of Defiance ETF, told Bloomberg Television such a move that soaks up money "is something that will probably keep us in a range-bound mode until we see where it all lands, including the Fed's final decision on rates".
Traders have been broadly upbeat after a "Goldilocks" jobs report Friday that was neither too good nor too bad suggested the economy was not facing an immediate risk of a recession and could still give the Fed room to hold policy steady next week.
There is a growing hope that the central bank will decide against a hike but flag a resumption in July as officials try to bring inflation down while limiting damage to the economy and the troubled banking sector.
But observers point out that there is some disagreement within the policy board on the best way forward, while the decision comes a day after the release of consumer price figures, which could have an impact on policymakers' vote.
Still, Stephen Innes at SPI Asset Management said: "Ultimately, if the Fed chooses to pause the rate hike cycle at the June meeting, the table may be set for a continuation of a 'not too hot/not too cold' environment conducive to stock picking."
Asian markets were mixed.
Hong Kong reversed early gains of more than one percent after a healthy two-day rally, and there were also losses in Shanghai, Sydney, Singapore, Manila and Mumbai.
But Tokyo, Taipei, Wellington, Bangkok and Jakarta were in the green, while London, Paris and Frankfurt dipped in the morning.
Sydney dropped more than one percent after Australia's central bank announced a 25-basis-point rate hike and said more could be in the pipeline owing to persistently high inflation.
The Australian dollar jumped more than one percent against the US dollar.
Crude was down around two percent after a rally on Monday petered out, even after Riyadh announced a surprise one-million-barrel-a-day cut to output for next month.
The weakness in the commodity comes as investors fret over the impact on demand from rising interest rates and slowing economic activity, particularly in China, which is struggling to kick on after reopening from zero-Covid at the end of last year.
Bitcoin fell more than three percent to $25,785 after US regulators charged cryptocurrency giant Binance with securities law violations.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: UP 0.9 percent at 32,506.78 (close)
Hong Kong - Hang Seng Index: DOWN 0.1 percent at 19,099.28 (close)
Shanghai - Composite: DOWN 1.2 percent at 3,195.34 (close)
London - FTSE 100: DOWN 0.1 percent at 7,592.38
Euro/dollar: UP at $1.0717 from $1.0708 on Monday
Dollar/yen: DOWN at 139.25 yen from 139.54 yen
Pound/dollar: UP at $1.2432 from $1.2431
Euro/pound: UP at 86.17 pence from 86.15 pence
West Texas Intermediate: DOWN 2.1 percent at $70.66 per barrel
Brent North Sea crude: DOWN 1.9 percent at $75.22 per barrel
New York - Dow: DOWN 0.6 at 33,562.86 (close)
dan/pbt
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