Futures drop on caution before data

NEW YORK (Reuters) - Stock index futures fell on Friday as caution before economic data, including September housing starts, offset reports of reassuring profits from manufacturer Honeywell International Inc and Google Inc .

The government's report on housing starts for September, due at 8:30 a.m. EDT, could show a third straight month of decline. The Reuters/University of Michigan Surveys of Consumers' preliminary sentiment index for October is due at 9:55 a.m.

As concerns mount about the threat of recession, investors will scrutinize the data and corporate forecasts for clues about the extent of the fallout from the housing downturn.

"We have two reports coming up this morning, and they will help drive the market," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"But as we've seen yesterday, this market is totally unpredictable in terms of what direction it's going to take. There's so much turmoil going on, particularly with forced liquidation."

S&P 500 futures fell 6.90 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 slipped 95 points, and Nasdaq 100 futures dropped 15.50 points.

Before the bell, Honeywell reported stronger-than-expected quarterly profit, joining others like Internet company Google and chip maker Advance Micro Devices Inc with earnings above Wall Street's forecasts.

Warren Buffett, writing in the New York Times, said he is buying U.S. stocks. The richest American and head of Berkshire Hathaway Inc commands a wide following among investors.

The interbank cost of borrowing dollars, euros and sterling again fell on Friday, indicating efforts to unfreeze lending were working to restore some confidence.

U.S. stocks leapt on Thursday as investors snapped up beaten-down shares the day after Wall Street's worst day since the 1987 stock market crash while consumer companies gained as the price of oil fell.

(Editing by Kenneth Barry)