* FOMC begins two-day interest rate policy meeting
* Starbucks, FedEx rise after upgrades
* Futures up: S&P 3.90 pts, Dow 27 pts, Nasdaq 3 pts (Adds details, rewrites throughout)
By Leah Schnurr
NEW YORK, June 23 (Reuters) - Wall Street was set to rise at the open on Tuesday as investors sought bargains the day after stocks racked up their worst one-day loss in two months.
Worries that a recovery will be tepid has caused stocks to pull back lately, and analysts will look at the day's economic data for signs of stabilization.
The National Association of Realtors will release existing home sales for May, while the Federal Reserve Bank of Richmond will announce June indexes on area manufacturing and service sectors.
The Federal Open Market Committee begins a two-day meeting on interest rate policy, and bond traders are watching for any changes to the central bank's $300 billion Treasury bond purchasing plan and the economic outlook. The Fed will release a statement on Wednesday.
The broad S&P 500 dropped back into negative territory for the year on Monday as investors reconsidered the health of the economy and grew nervous about the possibility of a correction after a three-month rally. But the pullback could be a chance for investors sitting on the sidelines to get back into the market.
"We're going to get the opportunity to look at things in a fashion that may resemble more of a 'Where are the opportunities,' versus 'How quickly can I get out of stocks?'" said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.
S&P 500 futures rose 3.90 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 climbed 27 points, and Nasdaq 100 futures added 3 points.
Though the S&P 500 is up 32 percent from March's 12-year low, it has eased off a gain of as much as 40 percent.
Hogan said defensive stocks could lead as investors shift into companies that are perceived as better able to weather the economic storm.
Shares of Starbucks Corp and FedEx Corp both benefited from broker upgrades. Starbucks rose 2.1 percent to $14 after Robert W. Baird said it raised its rating to "outperform" from "neutral."
FedEx gained 2.9 percent to $51.50 after JPMorgan boosted the shares to "overweight" from "neutral," according to theflyonthewall.com.
A U.S. Treasury auction later in the day will be watched for how successfully the new securities are absorbed by the market. The auction of $40 billion in two-year notes is part of a total of $104 billion in new issuance this week, the largest single-week amount of debt sales.
Moody's Investors Service said the United States' Aaa credit rating was safe, but added it could be at risk if Washington is unable to bring public debt back on a downward trajectory.
Investors are jittery that triple A-rated governments such as the U.S. and Britain could face credit rating downgrades as they borrow heavily to fund efforts to pull out of recession.
The comments from Moody's could prove to be a positive for the bond auction, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.