* President Obama to nominate Yellen as Fed chair Wed
* Alcoa rises, Yum falls after earnings
* Jos. A. Bank mulls buying Men's Wearhouse for $2.3 bln
* Futures up: Dow 24 pts, S&P 3.9 pts, Nasdaq 6.25 pts
By Chuck Mikolajczak
NEW YORK, Oct 9 (Reuters) - U.S. stock index futures rose modestly on Wednesday, indicating the S&P 500 may rebound from its worst drop since August, on expectations Janet Yellen will be tapped as the next chairman of the U.S. Federal Reserve.
U.S. President Barack Obama will nominate Fed number two Yellen on Wednesday. Investors expect her to tread carefully in winding down economic stimulus, and to provide continuity with the policies established under Fed Chairman Ben Bernanke, whose second term is due to expire on Jan. 31.
"We've waited too long for this answer and at least that is one hurdle we can say we've successfully cleared," said Art Hogan, managing director at Lazard Capital Markets in New York.
"We didn't know who that was going to be, now we do, we can move forward and turn the page on that but it's not bad news for sure."
The S&P 500 dropped 1.2 percent on Tuesday, its worst decline since Aug. 27, sending the benchmark index to its lowest since Sept. 6 as traders cashed in gains in some of the year's best performers.
In Washington, Obama said he would not hold talks on ways to end the fiscal impasse while under threat from conservative Republicans, but agreed to discuss anything, including his healthcare plan, if they restore government funding and raise the debt limit.
"There is a glimmer of hope that we have moved into the zone of compromise here and that comes with the conversation around agreeing on a short term lift to the debt ceiling and continuing resolution if that leads to a discussion on a larger budget agreement," said Hogan.
The crisis in Washington threatens to damage the fiscal standing of the United States and to derail its fragile economic recovery.
S&P 500 futures rose 3.9 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 24 points and Nasdaq 100 futures added 6.25 points.
Alcoa Inc climbed 2.6 percent to $8.15 in premarket trading after the aluminum producer reported better than expected earnings, as strength at the unit that sells auto parts and other complex items helped offset lower metal prices.
Costco Wholesale Corp slipped 1.2 percent before the opening bell after the retailer posted a 1 percent rise in quarterly profit and a 3 percent increase in its same-store sales for the month of September.
Yum! Brands Inc slumped 7.4 percent to $66.37 in premarket trading after the KFC parent warned it will take longer than expected for restaurant sales to rebound in China, which accounts for more than half the company's overall operating profit.
According to Thomson Reuters data, third-quarter earnings are expected to grow 4.3 percent, and revenue 3 percent.
Men's Wearhouse Inc surged 33.4 percent to $47.902 in premarket trading after Jos. A. Bank Clothiers Inc offered to buy its bigger rival for about $2.3 billion. Jos. A Bank shares gained 12.2 percent to $46.75 before the opening bell.
European shares steadied, with one-month lows attracting buyers and with investors balancing the continued U.S. fiscal deadlock against expectations of continuity from the new Federal Reserve head.
Asian shares sagged as the U.S. budget deadlock chipped away at investors' confidence that a deal would be reached before a mid-October deadline to avoid a historic debt default.