Stocks turned higher early Wednesday as traders did selective buying on the first day of a

Federal Reserve's

policy meeting in Washington.

Index futures recently showed the

S&P 500

trading a point above fair value, while the Nasdaq 100 was set for a half-point rise. The 10-year Treasury bond was unchanged in price to yield 5.20%, while the dollar was higher against the euro and lower against the yen.

Members of the Federal Open Market Committee meet in Washington Wednesday morning, with their rate announcement scheduled for tomorrow afternoon. Fed fund futures continue to price in virtual certainty that policymakers will carry out their 17th consecutive quarter-point rate hike Thursday, bringing the benchmark interest rate to 5.25%.

Overseas markets were mixed, with London's FTSE 100 recently up 0.2% to 5664 while Germany's Xetra DAX lost 0.2% to 5447. In Asia, Japan's Nikkei plunged 1.9% overnight to 14,886, while Hong Kong's Hang Seng slipped 0.2% to 15,743.

U.S. stocks closed sharply lower on Tuesday as investors took a cautious view of better-than-expected reports on home sales and consumer confidence. For the session, the

Dow Jones Industrial Average

lost 1.1% to 10,925, the S&P 500 fell 0.9% to 1239 and the

Nasdaq Composite

shed 1.6% to 2100.

Nike

(NKE) - Get Report

said late Tuesday that fourth-quarter earnings fell from a year ago due to an arbitration charge, while its adjusted profit of $1.39 a share was a penny light. Shares slipped about 2% in after-hours trading.

Warner Music

(WMG)

and

EMI

continue to circle each other. In the latest development, EMI rejected a sweetened takeover offer from Warner that values the British music giant at $4.56 billion. EMI has its own offer on the table for Warner worth about $31 a share in cash.

CNet

(CNET) - Get Report

received a grand jury subpoena from federal prosecutors in California seeking information on past option grants, the company said. CNet formed a committee last month to investigate whether employees received "backdated" options, the widespread practice that is the subject of a broad

SEC

probe.

To view David Peltier's video take on today's premarket action, click here

.

UPS

(UPS) - Get Report

could collect an additional $100 million of annual revenue transporting mail for the U.S. Post Office under an agreement expected to be announced Wednesday. The

Wall Street Journal

says the arrangement could start as early as this Saturday.

Oil rose ahead of the Energy Department's weekly update on fuel inventories. In electronic Nymex trading, crude for August delivery was up 26 cents to $72.18 a barrel. Analysts expect the 10:30 a.m. EDT report to show a 450,000-barrel build in gasoline inventories and an 800,000-barrel decline in crude stockpiles.

Wednesday morning, Merrill Lynch raised its prediction of the price of oil for the next several years, although the new targets represent declines from current levels. Merrill sees benchmark crude trading in the mid-$60 range for 2006 and 2007 as high inventory levels offset "robust" worldwide demand.