Investors are also waiting for the Fed's latest decision on interest rate policy. The FOMC is expected to try to push already low long-term interest rates even lower this week by tilting towards longer-duration bonds in its portfolio, a move known as Operation Twist.
“We don’t see [the Fed’s Operation Twist] having a powerful influence on equities at all,” Doug Cliggott, U.S. equity strategist with Credit Suisse told CNBC. “Interest rates are already so low, so the policy instrument that’s having much more influence on growth is fiscal policy and what we’re seeing in the U.S. is tightening.”
“If the Fed does less than the market expects, it’s not going to be a positive for equities, but I don’t think current market levels are built on Fed expectations this year to a similar extent that they were a year ago when everyone was all excited about QE2,” continued Cliggott.
The meeting follows efforts by President Obamato reduce the budget deficit by $3.6 trillion partly by raising taxes on the rich. Republicans immediately rejected the proposals as a political stunt, labeling the plans “class warfare," and made clear the proposal had little chance of becoming law.
Apple edged higher to hit another all-time intraday high after Wedbush raised its price target on the tech giant to $530 from $510. Meanwhile, rival Samsung is considering legal action to ban sales of the iPhone maker.
Among other techs, Netflix slumped to hit a 52-week lowafter the movie-rental company said it is separating its movie streaming business and DVD by mail service. Netflix's market value has been cut in half since the movie-rental company changed its pricing structure two months ago.
Tech firms Oracle and Adobe are slated to post earnings after-the-bell.
ConAgra fell after the food producer's profit tumbled 42 percent amid higher costs in its consumer foods unit.But the company still maintained its full-year earnings forecast and said it plans to keep increasing prices.
Separately, ConAgra pulled its $94 a share bid for Ralcorp after the offer was spurned numerous times by the company’s board.
Carnival jumped after the cruise line operator posted higher-than-expected earnings.
General Electric slipped even after the minority owner of CNBC said it received a number of new orders with more than $3 billion in its energy business.
Meanwhile, U.S. reinsurer Transatlantic Holdings , which rejected a takeover offer from Warren Buffett's Berkshire Hathaway , is exploring a "limited standstill" agreement with Validus Holdings, according to the Wall Street Journal.
Jazz Pharmaceuticals rallied after the health care firm said it would acquire privately held Azur Pharma to form a specialty pharmaceutical company in Ireland.
On the economic front, housing starts fell more than expected in August, according to the Commerce Department.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
On Tap This Week:
WEDNESDAY: Weekly mortgage apps, existing home sales, oil inventories, FOMC mtg announcement, Coca-Cola analyst mtg; Earnings from General Mills, Bed, Bath & Beyond
THURSDAY: Jobless claims, FHFA home price index, leading indicators, Geithner speaks at Global Economy Summit; Earnings from Discover Financial, FedEx, Nike
FRIDAY: IMF/World Bank annual mtg; Earnings from KBHome
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