By Sagarika Jaisinghani and Ambar Warrick

(Reuters) – U.S. stock futures rebounded on Tuesday as investors tried to shake off fears of contagion from a potential collapse of China’s Evergrande, although gains were capped by concerns the Federal Reserve could set out a timeline to taper its stimulus at the meeting this week.

The blue-chip Dow futures, which contain several sensitive stocks, rose 0.97% on Tuesday, one day after the index plunged 1.8%.

The fear that Evergrande’s default of $305 billion could have a ripple effect on China’s banks, property sector and wider economy caused world stocks to struggle for footing. [MKTS/GLOB]

Analysts at Mizuho stated in a client letter that “while the consensus is that Evergrande does not pose a risk to Lehman Brothers, it offers no comfort whatsoever.”

“It could end up being China’s proverbial house of cards … with cross-sector headwinds already felt in materials/commodities.”

6.28 AM ET, were up 37.25 points, or 0.86% and 110.25 points, or 0.73%.

The dropped substantially below its 50-day moving average on Monday, its first major breach in more than six months. This average served as an index floor this year.

Freeport-McMoRan (NYSE:) Inc led mining stocks higher with a 3% jump, following a 3.2% plunge in the S&P mining index a day earlier as prices hit a one-month low. [MET/L]

Inflation-sensitive banks stocks bounced back, following a rise of Treasury yields. [US/]

On Wednesday, the Fed’s policy meetings will draw attention to the outcome. The central bank is expected lay the foundation for easing its stimulus. However, consensus suggests that an announcement may be postponed until November or December.

Taper fears have already roiled markets so far in September, setting the S&P 500 on course to snap a seven-month winning streak.

Heavyweight technology stocks, including Apple Inc (NASDAQ:), Tesla (NASDAQ:) Inc, Facebook Inc (NASDAQ:) and Alphabet (NASDAQ:) Inc, rose between 0.8% and 1.1%.

Wall Street’s fear index, the CBOE Volatility Index, was down 0.8% to 1.1% from Monday’s high of four months.