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U.S. Stock Futures Fall on Housing Starts, Price Data Before Fed

June 17 (Bloomberg) -- U.S. stock-index futures fell, after equities gained for two days, as data showed housing starts declined more than estimated and the cost of living rose before the Federal Reserve begins its monetary-policy meeting.

Medtronic Inc. advanced 2.5 percent as brokers including Morgan Stanley and Credit Suisse Group AG raised their ratings on the company. Nuance Communications Inc. added 3.8 percent, signaling the maker of speech-recognition software will extend yesterday’s biggest rally in five years amid reports it has talked to potential buyers.

Futures on the Standard & Poor’s 500 Index expiring in September fell 0.1 percent to 1,927.2 at 8:36 a.m. in New York. Dow Jones Industrial Average contracts lost 17 points, or 0.1 percent, to 16,685 today.

“This is a phase where you still want to be invested in U.S. equities,” said Samy Chaar, a strategist at Lombard Odier in Geneva. “The economy is very robust, you still have cash returning zero, and the Fed is still pretty active. But economic activity is maturing and this may bring some sort of discomfort for investors.”

U.S. stocks rose 0.1 percent yesterday as corporate deals and growth in American manufacturing overshadowed escalating tension in Iraq. The S&P 500 dropped 0.7 percent last week as Sunni insurgents in Iraq occupied more territory and oil prices jumped to an eight-month high.

The benchmark index has advanced 4.8 percent this year, reaching a record on June 9, as equities were boosted by better- than-forecast economic data and monthly asset purchases by the Fed. The S&P 500 is trading at 16.4 times the projected earnings of its members, up from 15.5 times at the beginning of the year.

Housing Data

The cost of living in the U.S. rose more than forecast in May, reflecting broad-based gains that signal inflation will move closer to the Fed’s goal. The consumer price index increased 0.4 percent, the biggest advance since February 2013, after climbing 0.3 percent the prior month, a Labor Department report showed today.

The Fed begins its two-day policy meeting today in Washington. The central bank will reduce the pace of monthly asset purchases by $10 billion to $35 billion, economists project. Some 62 percent of 58 economists in a Bloomberg survey predict the Fed will halt bond buying at its October meeting.

Economic Forecasts

Officials led by Chair Janet Yellen will release a new set of quarterly forecasts for unemployment, inflation, economic growth and the benchmark federal funds rate at the conclusion of their meeting tomorrow. In March, officials predicted their target rate, now close to zero, would be 1 percent at the end of 2015 and 2.25 percent a year later.

Medtronic gained 2.5 percent to $61.53. Morgan Stanley upgraded the maker of medical devices to overweight, similar to a buy recommendation, from equal weight, citing potential returns from its deal to buy Covidien Plc. Credit Suisse and RBC Capital Markets also recommended buying the stock.

Nuance Communications added 3.8 percent to $19.48. The stock jumped 9.7 percent yesterday to its highest price in more than eight months, after the Wall Street Journal said the company had recently spoken about a possible sale with Samsung and private-equity firms. The newspaper cited unnamed people familiar with the matter.

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