The S&P 500 fell Tuesday, dragged lower by declines in megacap tech stocks, as investors braced for quarterly reports from names in that cohort. Traders also set their eyes on Washington as the Federal Reserve began its latest policy meeting.

The broad market index lost 0.5% and ended the day at 5,436.44, while the Nasdaq Composite tumbled 1.28% to close at 17,147.42. The Dow Jones Industrial Average climbed 203.40 points, or 0.5%, to 40,743.33.

Nvidia shares pulled back by 7%, while Microsoft shed about 0.9%. Tech-related giants Amazon, Netflix and Meta Platforms also declined.

It is a big earnings week for megacap tech names. Microsoft is set to report after the bell Tuesday. Meta, Amazon and Apple are on deck for later this week.

The earnings season has been a solid one thus far. Of the 240 S&P 500 names that have reported, about 80% have beaten earnings expectations, according to data from FactSet.

"We are seeing a broadening in earnings growth," said Mona Mahajan, Edward Jones principal and senior investment strategist. "We do think that with tech earnings, the bar is high. If we get any whiffs of a cooling in [artificial intelligence] spending, we could see the stocks pull back a bit. But we've already gone through a decent correction."

Mahajan added that the soft landing narrative remains intact, in her view, and that a potential rate cut from central bankers coupled with moderating inflation could lend to a strong backdrop for a continued broadening of the market as traders look to areas outside of megacap technology.

The Fed's two-day policy meeting began Tuesday, with investors hoping Chair Jerome Powell will signal the timing and number of rate cuts expected in the next few months. Traders have priced in a 100% chance for a September rate reduction, according to the CME FedWatch Tool.

"Inflation is trending lower, supporting Federal Reserve rate cuts," said Seema Shah, chief global strategist at Principal Asset Management. "This, coupled with a still robust economic outlook and strong corporate earnings, should bolster risk assets and lead to a broadening of returns away from just technology."

CrowdStrike shares fell 9.7% after CNBC reported that Delta Air Lines hired attorney David Boies to seek damages from the cybersecurity company and Microsoft after an outage this month led to thousands of flight cancellations. Shares of CrowdStrike are down nearly 40% in July, on pace for their worst monthly performance ever.

Merck shares dropped 9.8% as weaker-than-expected guidance for the full year overshadowed a strong second-quarter report. Procter & Gamble lost 4.8% after its quarterly revenue fell short of Wall Street's estimates due to disappointing demand in China.