* Kindred Healthcare to acquire RehabCare Group
* China rate hike shifts focus to demand growth
* Futures: Dow off 7 pts, S&P off 1.2 pts, Nasdaq up 0.5
* For up-to-the-minute market news see [STXNEWS/US] (Updates prices, adds quote, byline)
By Rodrigo Campos
NEW YORK, Feb 8 (Reuters) - U.S. stock index futures were little changed on Tuesday, with investors focused on corporate earnings and the impact an interest rate hike in China will have on global economic demand.
Investors said stocks could also be affected by how well the auction of $32 billion of U.S. three-year notes proceeds later on Tuesday. The sale is part of $72 billion in government debt being offered this week. A hike in funding costs could hurt corporate earnings.
Merger activity, which drove the Dow and S&P to 2-1/2 year
highs on Monday, continued Tuesday, with Kindred Healthcare
Inc's
China's central bank raised interest rates by 25 basis points, its second increase in just over a month in a new bid to tame inflation, while consumer prices in Brazil surged at their fastest pace in nearly six years in January. [ID:nTOE706030] [ID:nN08268227]
"The China rise in rates is significant to the market," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
"Earnings are still coming in and they're good, and that may be canceling out some of the negative news today."
With more than half of the S&P 500 companies' quarterly results in, 72 percent have beat expectations.
S&P 500 futures
Corporate earnings could once again dictate near-term
market direction, with Walt Disney Co
Teva Pharmaceutical Industries'
Exchange group NYSE Euronext
Intel Corp
Following Monday's gains, the S&P 500 faces resistance around 1,325 with near-term support at 1,300 and 1,295.
Accelerating inflation in emerging markets, coupled with recent upbeat economic data, could favor equities in the United States and other developed markets.
Tokyo's stock market rose to a nine-month high, with market players indicating better-than-expected earnings from U.S. and Japanese companies have accelerated a shift of money out of inflation-dogged emerging markets and into developed markets with loose monetary policies and more subdued price pressures. [.T]. (Reporting by Rodrigo Campos; Editing by Kenneth Barry)