Wall Street set for flat start on fiscal cliff angst

NEW YORK (Reuters) - Stocks were set to open little changed on Tuesday as the market remains hostage to negotiations in Washington on how to avert a "fiscal cliff" that could push the U.S. economy into recession.

Republicans in Congress proposed steep spending cuts to bring down the budget deficit on Monday but gave no ground on President Barack Obama's call to raise taxes on the wealthiest Americans, and the proposal was quickly dismissed by the White House.

Headlines about the back-and-forth preliminary proposals by Republicans and Democrats have fixated the market. Still, many investors expect the two sides to come up with a deal before the year-end deadline, which could trigger a rally in equities.

"Support (for the market) is based on a belief that Washington will come to some agreement before we go over the fiscal cliff," said Art Hogan, managing director of Lazard Capital Markets in New York.

He said that while politicians are concerned with showing a hard line in public, there is hope "their staffers are looking for middle ground."

Hogan added, "On the first show of flexibility from either side, we'll get a relief rally."

Obama will meet with U.S. governors at the White House on Tuesday to talk about the fiscal cliff, a $600 billion package of tax hikes and federal spending cuts that would begin January 1.

The president is also expected to talk about the fiscal cliff during an interview scheduled for 12:30 p.m. (1730 GMT) on Bloomberg TV.

Coach became the latest company to advance the date of its next dividend payment. Expectations of higher taxes on dividends kicking in in 2013 have pushed many companies to pay special dividends this year or advance their next pay-back to investors.

S&P 500 futures dipped less than a point and were flat in terms of 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 18 points, and Nasdaq 100 futures added 3 points.

The light calendar for data includes the Institute for Supply Management-New York release of its November index of regional business activity at 9:45 a.m. (1445 GMT).

Toll Brothers shares rose 4.2 percent in premarket trading after the largest U.S. luxury homebuilder reported a higher quarterly profit and said new orders rose sharply.

MetroPCS Communications shares dropped 6 percent premarket after Sprint Nextel appeared unlikely to make a counter-offer for the wireless service provider.

Cerberus Capital Management is in talks to join Virtu Financial's bid for U.S. brokerage Knight Capital Group , the Wall Street Journal reported, citing people familiar with the discussions. Knight became a takeover target after a trading glitch left it nearly bankrupt earlier his year.

Shares of Pep Boys-Manny Moe and Jack were down 8.7 percent in premarket trading a day after the release of the auto parts retailer's results.

U.S. stocks fell on Monday as disappointing numbers on U.S. factory activity overshadowed optimism about China's economic growth.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)

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