U.S. stocks were set for higher open on Tuesday as better-than-expected home sales data for July provided further evidence that the domestic housing market was bottoming out.

The S&P/Case-Shiller 20-city U.S. home price index for July rose 1.6 percent, higher than a 0.5 percent increase expected from economists surveyed by Reuters.

The housing market does seem to have found a base, and prices seem to be in recovery, which is quite significant, said David Sloan, economist at 4CAST LTD in New York.

Investors will now focus on key consumer confidence data due at 10 a.m. <1400 GMT> The Conference Board's Consumer Confidence Index is to rise to 57.0 for September, up from August's 54.1, according to a Reuters survey of economists. Despite an improvement, the reading would still be considered far from healthy, suggesting consumers are worried about more economic woes ahead.

U.S. stocks rallied on Monday, snapping a three-day losing streak, as a spurt of corporate takeovers in the technology and health-care sectors fueled optimism about share values.

The Dow Jones industrial average marked its biggest one-day point and percent gain since August 21 and held an advance of about 16 percent in the quarter so far, its best such period since the fourth quarter of 1998.

But the end of the third quarter on Wednesday may spur volatility as fund managers engage in what is known as window dressing -- the sale of laggard stocks in favor of outperformers to spruce up portfolios at quarter's end.

Futures erased losses after the home price index. S&P 500 futures rose 3.8 points and were above 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 gained 16 points and Nasdaq 100 futures gained 1.25 points.

CIT Group Inc shares rose 14 percent before the bell to $1.90 on a report that hedge fund manager John Paulson was considering merging the troubled U.S. finance company with failed mortgage lender IndyMac Federal Bank .

Walgreen Co shares rose 6.8 percent at $36.40 in premarket trade after the company reported its quarterly results.

Nike Inc , Micron Technology Inc and Jabil Circuit Inc are set to report quarterly results later in the day. (Editing by Padraic Cassidy)