S&P, Dow set for record open; Fed's meeting awaited

By Sruthi Shankar

(Reuters) - U.S. stocks index futures pointed to another record open for the S&P and the Dow on Tuesday, ahead of the two-day Federal Reserve meeting that is expected to roll out a plan to pare the central bank's bond holdings.

Investors do not expect the central bank to increase interest rate in the meeting but will closely watch Fed Chair Janet Yellen's views on inflation, which remains stuck below the Fed's 2-percent target rate.

"If I'd be watching anything, it would be primarily with regard to their plans to raise rates in December, which now the market has a 50-50 odds on," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

However, the biggest determinant (a Dec. rate hike) will be how the equity and bond markets react to the reduction of Fed's bond portfolio, said Frederick.

Any reduction in the balance sheet could make it harder for banks and investors to borrow certain Treasuries in the repurchase agreement market, making it more difficult and expensive to bet on or protect against interest rate increases.

U.S. stocks have been breaching record levels, with the Dow clocking a closing record for the fifth day in a row on Monday and the S&P closing at a record for the second consecutive session.

At 8:34 a.m. ET (1234 GMT), S&P 500 e-minis were up 2 points, or 0.08 percent, with 55 contracts changing hands.

Nasdaq 100 e-minis were up 5.75 points, or 0.1 percent, in volume of 26 contracts.

Dow e-minis were up 14 points, or 0.06 percent, with 11 contracts changing hands.

Investors will also watch U.S. President Donald Trump's speech at the United Nations General Assembly where he is expected to urge U.N. member states to increase pressure on North Korea to give up its nuclear weapon ambitions. The speech is scheduled at 10:30 a.m. ET.

U.S. Defense Secretary Jim Mattis hinted on Monday about the existence of military options on North Korea that might spare Seoul from a brutal counterattack. But he declined to say what kind of options he was talking about or whether they involved the use of lethal force.

Data showed U.S. homebuilding fell for a second straight month in August as a rebound in the construction of single-family houses was offset by weakness in the multifamily home segment.

Among stocks, Tesla was down 1.17 percent in premarket trading after Jefferies started coverage of the electric car maker's stock with "underperform".

Nike, a Dow component, fell 1.68 percent after a slew of price target cuts by brokerages on concerns about intensifying competition from Adidas.

Bob Evans Farms rose about 6 percent after packaged foods company Post Holdings said it would buy the frozen meals maker for about $1.5 billion.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)