US STOCKS-Wall St set for flat open as market digests budget deal

Reuters

* U.S. budget deal gets tentative approval

* Costco shares drop after profit misses estimates

* Futures: Dow up 12 pts; S&P flat; Nasdaq down 0.5 pt

By Angela Moon

NEW YORK, Dec 11 (Reuters) - Wall Street was set to openlittle changed on Wednesday as investors assessed a provisionalbudget deal reached in Washington and its potential impact on anexpected wind-down of Federal Reserve stimulus.

A bipartisan budget deal announced in the U.S. Congress lateTuesday, though modest in spending cuts, would end three yearsof impasse and fiscal instability in Washington that culminatedin October with a partial government shutdown.

While the agreement removed a key uncertainty hanging overmarkets, some expect it will strengthen a view that the U.S.central bank may soon start to scale back its $85billion-a-month stimulus program.

"The market did not have ample time to properly examine thepotential impact (of the budget deal on Fed's stimulus program).The expectation of tapering is definitely among investors and wewill have to see how everything plays out," said Andre Bakhos,managing director at Janlyn Capital LLC in Bernardsville, NewJersey.

Although the benchmark S&P 500 hit a record close earlier inthe week, investors have hesitated to make big bets ahead ofnext week's Federal Reserve meeting, in the absence ofmarket-moving economic data. The Federal Open Market Committeemeeting is set for Dec. 17-18.

S&P 500 futures reversed earlier losses to trade flatand were in line with fair value, a formula that evaluatespricing by taking into account interest rates, dividends andtime to expiration on the contract. Dow Jones industrial averagefutures rose 12 points while Nasdaq 100 futures lost 0.5 point.

Despite retreating Tuesday in thin trading, the S&P 500 heldabove key technical indicators, including its 14-day movingaverage.

"I still have my eye on the S&P 500 index's 1,800 level,"said Bryan Sapp, senior trading analyst at Schaeffer'sinvestment research in a note to clients.

"The market saw support there twice (on Tuesday). Goingforward, though, a failure at this round number couldpotentially result in a move down to 1,780 or so, which is lastweek's pre-jobs-report low."

In company news, Costco Wholesale Corp sharesslipped 1.5 percent in premarket trading after the retailer'sfirst-quarter profit missed Wall Street estimates due to lowergasoline prices and weak foreign currencies.

Home Depot Inc shares were little changed inpremarket trading after the company said it expects sales growthof approximately 5 percent in 2014.

Mining equipment maker Joy Global Inc forecast 2014earnings below analysts' estimates after reporting a quarterlyprofit that fell short of expectations as miners cut spending.Still, the stock rose 4.4 percent in premarket trade.

Economic data expected on Wednesday includes the TreasuryDepartment's monthly budget data for November at 2:00 p.m. EST(1900 GMT).

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