BP PLC said late yesterday it would shut down the Prudhoe Bay oilfield, which represents 8 percent of daily U.S. crude production, due to possible pipeline corrosion. Crude oil futures surged $2.22 in response to settle at $76.98 a barrel on the New York Mercantile Exchange — near the closing record of $77.03 and all-time intraday high of $77.40, both set July 14.

The stock market showed some resilience despite the higher oil prices, as many investors held out hope that the Fed would not raise rates tomorrow. Nonetheless, there are concerns that even if the Fed halts its rate increases, inflation may yet become a concern.

"Whether or not the Fed pauses in August is not as important as their plan going forward," said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "I don't think the market's going to get the kind of finality it's looking for. The concern is, yes, they pause in August, but raise the specter of raising rates in September."

According to preliminary calculations, the Dow Jones industrial average fell 20.97, or 0.19 percent, to 11,219.38.

Broader stock indicators also dropped. The Standard & Poor's 500 index lost 3.59, or 0.28 percent, to 1,275.77, and the Nasdaq composite index shed 12.55, or 0.6 percent, to 2,072.50.

Bonds lost ground as well in advance of the Fed meeting, with the yield on the benchmark 10-year Treasury note rising to 4.92 percent from 4.9 percent late Friday. The dollar gained against most major currencies, while gold prices also rose.

The nation's benchmark interest rate now stands at 5.25 percent, and the Fed has raised rates by a quarter percentage point in each of its last 17 meetings dating back to June 2004. Ever since the Fed signaled six weeks ago that the economy was growing at a slower rate, and that it was taking this moderation into account in its deliberations, Wall Street has been parsing economic data and looking for signs of further slowing in hopes that the Fed would stop raising rates.

Over the past two weeks, slowing job growth and a weaker-than-expected second-quarter gross domestic product had many investors optimistic that the long-expected pause will come tomorrow. The market's modest move lower on very light trading volume showed investors' willingness to wait and see what the Fed will do.

The market's optimism was evident today, when stocks, despite their declines, largely stood their ground amid rising oil prices.

"If you plot the S&P 500 against oil prices for the last two to three years, they're both rising," said Brian Gendreau, investment strategist for ING Investment Management. "Now, certainly, if oil prices stay this high, consumer spending and earnings are going to be hurt. But for now, I think we're hanging in there today because we're actually enjoying some rationality."

Shares of BP lost $2.09 to $70.45 on the Prudhoe Bay shutdown, which would take away 2.5 percent of the company's total daily production. BP Prudhoe Bay Royalty Trust, which manages the oilfield's business on behalf of BP and others, tumbled $11.04, or 13 percent, to $76.85.

Rival oil producers saw modest gains, however, as investors believed they would benefit from the spike in oil prices. Hess Corp. rose 72 cents to $52.72, while Chevron Corp. climbed $1.17 to $66.83.

In earnings, power producer AES Corp. said its quarterly profit nearly doubled due to higher electric prices and better revenues across all its businesses. AES gained $1.82, or 10 percent, to $20.07.

Oil and gas explorer and transmitter El Paso Corp. fell 81 cents to $14.76 despite posting a profit after a year-ago loss. The company beat Wall Street's earnings forecasts by a penny per share after one-time gains.

Comic book publisher Marvel Entertainment Inc. said its licensing deals, a lucrative part of its overall revenue stream, slumped in the second quarter, though its profits still beat analyst expectations. Marvel rose $1.26 to $19.36.

Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where preliminary consolidated volume came to 2.11 billion shares, compared with 2.63 billion traded Friday.

The Russell 2000 index of smaller companies was down 5.21, or 0.74 percent, at 696.05.

Interest rate concerns and rising oil prices also weighed on overseas markets, with Japan's Nikkei stock average tumbling 2.23 percent. In Europe, Britain's FTSE 100 closed down 1.03 percent, while Germany's DAX index and France's CAC-40 both lost 1.68 percent.