Arm announces full IPO over-allotment exercise



Disney falls on doubling capex plan for parks business



Canadian inflation jumps on higher gasoline prices

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Indexes down: Dow 0.81%, S&P 0.73%, Nasdaq 0.87%

(Updated at 12:11 p.m. ET/ 1611 GMT)

By Ankika Biswas and Shristi Achar A

Sept 19 (Reuters) - Wall Street's main indexes dropped on Tuesday with the Nasdaq and the S&P 500 hitting more than three-week lows as Treasury yields firmed ahead of the Federal Reserve's policy meeting.

Investors also awaited Instacart's market debut, with the grocery delivery app's shares last indicated to open at $42, well above the IPO price of $30 apiece, after parent Maplebear Inc secured a fully diluted valuation of $9.9 billion on Monday.

Higher yields weighed on major growth stocks such as Amazon , Nvidia and Microsoft, down between 0.8% and 2.7%, while Consumer discretionary and communication services led declines in major S&P 500 sector indexes.

Investors were focused on the two-day Fed meeting that starts later in the day, with the central bank expected to hold benchmark interest rate at the current 5.25%-5.50% range on Wednesday.

Recent economic data has signaled that core inflation is crawling toward the Fed's 2% target, though crude prices gaining for three consecutive weeks to around 10-month highs remains a concern.

A jump in Canada's annual inflation rate in August on higher gasoline prices has fueled investor worries, analysts said.

"Markets will focus on the Fed's language, especially what they think," said Kim Forrest, chief investment officer at Bokeh Capital Partners.

"We all have an opinion on what the economy is doing, but apparently what the Fed thinks about it is the most important thing, if they see signs of softening or strengthening in the economy, and that will inform us what will happen in November."

Traders have fully priced in a pause by the Fed on Wednesday, while chances of interest rates remaining unchanged in November stood at 71%, according to CME's FedWatch tool.

Investors will scrutinize the Fed's quarterly report on economic projections, which will be released on Wednesday, to gauge participating members' longer-term policy outlook.

Economic data has largely indicated that the U.S. economy remains resilient, raising hopes for a soft landing and allaying concerns of a possible recession.

Chip designer Arm Holdings's stellar market debut last week has raised hopes of a revival in the initial public offering market, memek after a near 18-month dry spell, ahead of Instacart's debut.

Arm shares, however, were on track to drop for a third session since their debut as investor interest fades in the company that saw the biggest IPO of the year so far.

Positioning in the Arm's stock options on Tuesday continued to show investors were bracing for a further downside.

At 12:11 p.m. ET, the Dow Jones Industrial Average was down 279.95 points, or 0.81%, at 34,344.35, the S&P 500 was down 32.64 points, or 0.73%, at 4,420.89, and the Nasdaq Composite was down 118.81 points, or 0.87%, at 13,591.43.

Starbucks lost 2.1% after TD Cowen downgraded the coffee chain to "underperform".

Walt Disney lost 3.7% after nearly doubling its capital expenditure for the parks business.

Declining issues outnumbered advancers by a 1.87-to-1 ratio on the NYSE and by a 1.64-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs and eight new lows, while the Nasdaq recorded 21 new highs and 201 new lows. (Reporting by Ankika Biswas and Shristi Achar A in Bengaluru Editing by Vinay Dwivedi)