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Fed watchers eye economic reports

Economic news hogs the spotlight as investors mull over the last reports before the Federal Reserve meets. The Dow is set to open lower.

Economic news will hog the spotlight Tuesday as investors mull over the last reports before the Federal Reserve meets. The Dow was set to open sharply lower.

Most economists predict the Federal Open Market Committee will decide to cut interest rates for the sixth time in its meeting Tuesday and Wednesday this week, but the size of the cut is hotly debated.

Some economic data Tuesday could help sway the Fed on that decision. There will be three new economic indicators to consider: the Conference Board's June consumer confidence index, which is expected to slip to 114.5 from 115.5 in May; and the Commerce Department's May new-home sales report, which is expected to come in at an annual rate of 900,000--up from 894,000 in April--and durable-goods orders for May, which are expected to have declined by 0.4 percent from the previous month.

The broader markets are likely to take a hit, a result of a profit warning from Merrill Lynch and layoffs at International Paper.

Stocks to watch
• Applied Micro Circuits could be set to tumble after its Monday night profit warning. The maker of chips for fiber-optic networks said it expects a loss of 4 cents to 6 cents a share, excluding certain costs, in the first quarter. It was expected to break even, according to the consensus estimate of First Call. Applied Micro also said it expects fiscal first-quarter revenue in the range of $40 million to $45 million, and cited market weakness for its troubles.

• PRI Automation also cut its financial targets. The maker of semiconductor-manufacturing equipment expects revenue in the third quarter of about $68 million, 20 percent less than its previous forecast. The company said lower revenue will result in larger operating losses than previously expected. First Call's consensus is for a loss of 13 cents a share.

• Cheap Tickets, a seller of discount airline tickets, said it expects second-quarter profit of 4 cents to 5 cents a share, less than the 22 cent average forecast by First Call. The company blamed slower-than-anticipated revenue growth.

• SafeNet also sees it's second-quarter results coming in below expectations. The provider of Internet security services said it expects a second-quarter loss of 9 cents to 13 cents a share, compared with its earlier forecast for profit of 4 cents. First Call is expecting 3 cents a share.

At the bell

The Dow Jones industrial average may open 116 points lower. The Standard & Poor's 500 index for June futures contracts was off 13.4 points to 1,210 points at 7:15 a.m. EDT in 24-hour electronic trading.

Reuters contributed to this report.