* Home Depot Q2 profit tops expectation, outlook raised
* Housing starts, producer prices on tap
* Futures up: Dow 63 pts, S&P 500 4.9 pts, Nasdaq 11 pts
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NEW YORK, Aug 18 (Reuters) - U.S. stock index futures rose on Tuesday, rebounding from a steep drop the previous session, ahead of data expected to show housing starts rose to their highest level in eight months.
* Home Depot Inc, the largest U.S. home improvement chain, reported better-than-expected quarterly profit, helped by cost cutting. Shares rose 1.5 percent in light premarket trading. A disappointing outlook from rival Lowe's Cos Inc helped push equities to their worst loss in seven weeks on Monday.
* The housing data comes as investors seek hints that a nascent housing recovery continues to gather steam. Fixing the U.S. housing market is seen as a key step in returning the economy to health.
* Economists forecast that housing starts increased to a seasonally adjusted annual rate of 600,000 units in July after rising to 582,000 units in June, according to a Reuters survey. It would be the third straight monthly increase.
* "The real mover on the day will probably be housing starts. Any strong number there will obviously add to positive sentiment in the housing market that things are beginning to stabilize," said Peter Cardillo, chief market economist at Avalon Partners in New York.
* "... Everyone is singing to the same tune that the correction is finally here. I don't subscribe to that," Cardillo said. "I think what we've gone through over the past few days is a bit of pullback from a very overbought situation."
* S&P 500 futures rose 4.90 points, and were 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 rose 63 points, and Nasdaq 100 futures added 11 points.
* The rise in futures mirrored a recovery in global indexes after a broad decline Monday. Japan's Nikkei closed up 0.2 percent, while in Europe the pan-European FTSEurofirst 300 index of top shares rose 1 percent.
* Retailer Target Corp is also set to report quarterly results. Despite falling sales, the No. 2 U.S. discount retailer has said that it has been able to protect margins by keeping down inventory.
* Also on the earnings front, Hewlett-Packard Co will report, and could jolt technology portfolios if there are signs of improved enterprise demand.
* The producer price index for July is expected to register a decline of 0.3 percent after jumping twice as much as expected in June to 1.8 percent on rising energy prices.
* Shares of Agilent Technologies Inc rose 2.9 percent after the closing bell after the company reported that third-quarter adjusted profit beat estimates and forecast a strong current quarter.