Stocks were set for a higher open on Tuesday as investors waited to see if the Federal Reserve's policy-setting panel offers aid to a sputtering U.S. economy.

At the two-day meeting that starts Tuesday, the Fed is expected to try to push already-low long-term interest rates even lower by tilting toward longer-duration bonds in its portfolio, a move known as Operation Twist.

Equity futures shrugged off Standard & Poor's downgrade of Italy's credit rating by one notch, an unexpected move that increased strains on the debt-stressed euro zone.

After the initial downward response in the S&P futures to the S&P downgrade of Italy, markets realized again that rating agencies follow the markets, never lead them, said Peter Boockvar, said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

The FOMC 2-day meeting begins today, and as I've said repeatedly, incremental Fed action is now impotent and in fact damaging.

Futures dipped after data showed U.S. housing starts declined more than expected in August as groundbreaking for both single-family and multi-family units decreased.

They missed and revised down. It's bad that the housing market is not only bad, but still missing low expectations, said Sal Catrini, a managing director for equities at Cantor Fitzgerald & Co in New York. Obviously the market has been ignoring bad news and has been rallying. We were oversold and this is a continuation of what we've seen over the past week.

S&P 500 futures were up 6 points and above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were up 47 points, and Nasdaq 100 futures rose 18.75 points.

U.S. stocks fell Monday but staged a late comeback after fears of a looming Greek debt default diminished on news of a possible deal to advance new bailout funds to Greece.

International lenders told Greece Monday it must shrink its public sector to avoid running out of money within weeks, worrying investors who dumped risky assets.

Samsung Electronics Co <005930.KS> is considering a lawsuit to ban sales of Apple Inc's new iPhone, sources told Reuters, in what could be its strongest step to defend against claims it copied Apple product designs.

Bank of China, a big market maker in China's onshore foreign exchange market, has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, sources told Reuters.

UBS AG's chief executive will seek a vote of confidence at a board meeting for plans to slash the investment banking division that caused a $2.3 billion loss due to unauthorized trading, a Swiss newspaper reported. U.S.-listed shares of UBS fell 1.5 percent to $11.34 in premarket trade.

European shares were higher Tuesday as investors went bargain hunting following sharp falls in the previous session.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)