US equity markets finished barely changed on Tuesday, digesting a better than expected retail sales report with investors largely sidelined ahead of a Federal Reserve decision.

Overall retail sales rose unexpectedly by 0.1 percent from July to August at US$710.8 billion, defying analysts' anticipation of a 0.2 percent decline, according to US data.

However, analysts said the data showed consumers tilting away from discretionary items towards essential needs, reflecting greater stress among consumers.

The Federal Reserve is widely expected to lower interest rates on Wednesday, but markets are unsure of the size of the cut.

The Dow Jones Industrial Average ended down less than 0.1 percent at 41,606.18, retreating from Monday's record close.

The S&P 500 rose less than 0.1 percent to 5,634.58, while the Nasdaq Composite Index advanced 0.2 percent to 17,628.06.

Futures markets currently view a 50 basis point interest rate cut as more likely than the 25 basis point reduction.

Analysts say the Fed could go either way and that a key question will what the central ban signals about monetary policy in the coming months.

Among individual companies, Microsoft climbed 0.8 percent after announcing a 10 percent dividend increase and an authorization of up to US$60 billion in share repurchases.

Intel gained 2.3 percent after unveiling a plan with Amazon to produce AI fabric chip for Amazon Web Services, describing the initiative as an expansion of a long-term strategic collaboration.

Amazon rose 1.1 percent.

Hawaiian Holdings, parent of Hawaiian Airlines, rose 3.9 percent after US officials approved its acquisition by Alaska Airlines. Alaska's parent, Alaska Air Group, dipped 1.1 percent. (AFP)