Wall Street set for lower open; Fed minutes on tap

NEW YORK (Reuters) - Wall Street was set to open lower on Wednesday amid caution ahead of the release of minutes from the Federal Reserve's most recent policy meeting, even as investors brushed off weak housing data.

U.S. housing starts recorded their biggest drop in almost three years in January, likely due to harsh winter weather, though the third month of declines in permits pointed to some underlying weakness in the housing market.

The data was among a slew of recent economic reports impacted by a severe U.S. winter, including U.S. homebuilder confidence on Tuesday which suffered its largest one-month drop in February.

At 2:00 p.m. EST, the U.S. central bank will release minutes of its January policy meeting, at which it decided to further trim its monthly bond buying program.

Tesla shares were in focus after they hit an all-time high of $206.00 in the previous session. Shares of the company, which reports earnings after the close, were down 1.1 percent in premarket trading.

S&P 500 e-mini futures fell 4 points and were below 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 fell 37 points and Nasdaq 100 futures lost 3.5 points.

Currency dealers kept an eye on China's central bank after it drained funds from the money market on Tuesday. The People's Bank of China (PBOC) is trying to engineer a gradual upward shift in the cost of money to encourage companies to deleverage and discourage high-risk shadow banking activity.

Investors were anxious in case monetary tightening in China, the world's second-largest economy, goes too far and hurts economic growth. Such concerns have periodically put pressure on global currencies and shares.

Herbalife LTD shares were up 1.5 percent in premarket trading a day after the nutritional-supplement company reported fourth-quarter earnings.

Kay Jewelers parent Signet Jewelers said it would buy smaller rival Zale Corp for $21 per share in cash, valuing the mid-tier jeweler at about $690 million. The offer represents a premium of about 41 percent to Zale's close of $14.91 on the New York Stock Exchange on Tuesday. Shares of Signet gained 13.9 percent in premarket trading while Zale jumped more than 40 percent.

Separate data showed U.S. producer prices rose for a second straight month in January, pushed up by an increase in the cost of goods, but there was little sign of a broad pick-up in inflation pressures at the factory gate.

On Tuesday, the Nasdaq Composite rose for an eighth straight session, a run not seen since early July.

(Editing by Bernadette Baum)