US STOCKS-Futures point to flat open before factory data
* Volatility expected ahead of Friday's payroll report
* Fed's Dudley to speak about national economic conditions
* Pfizer, Novartis may bid for Onyx: sources
* Futures up: Dow 2 pts, S&P 0.6 pt, Nasdaq 4 pts (Updates prices, adds analyst comment)
NEW YORK, July 2 (Reuters) - U.S. stock index futures pointed to a flat open on Tuesday, paring back from earlier modest gains as investors looked ahead to the latest economic data.
Wall Street has shown signs of positive momentum, with investors becoming more optimistic about the economic outlook since Federal Reserve officials signaled that the central bank's bond-buying stimulus policy wasn't ending imminently.
While markets have stabilized after a recent sharp decline, the S&P 500 remains more than 3 percent below its record closing high.
"We're seeing a retracement of a sell-off that was based in fear, though the market will likely continue to be emotional," said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.
William Dudley, the president of the New York Fed, will speak at 12:30 p.m. (1630 GMT) about national economic conditions. His comments will be closely scrutinized for clues about when the Fed might begin to scale back its quantitative easing.
May factory orders will be released at 10 a.m. (1400 GMT) by the government, and economists polled by Reuters expect a rise of 2 percent, twice the rate of the previous month.
Data on the Institute for Supply Management's New York regional business activity is also on tap for Tuesday, leading up to Friday's closely watched June payrolls report.
Auto companies will report June car sales on Tuesday, providing an indicators of consumer spending.
Wall Street has shown an ambiguous attitude toward U.S. data in the past six weeks, as positive reports sparked declines on concern that signs of a strong economy would cause the Fed to accelerate tapering its bond-buying program.
"Today's move will likely come down to whether we see a strong reaction to the data," Pursche said. "We'll likely be very unpredictable ahead of the payrolls report."
The Labor Department will report June non-farm payrolls on Friday, and economists have forecast an increase of 165,000 jobs. The stock market will have a shortened session on Wednesday and U.S. financial markets will be closed for Independence Day on Thursday.
S&P 500 futures rose 0.6 point and were slightly 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 added 2 points, and Nasdaq 100 futures were up 4 points.
Equities surged in the first half of the year, hitting record highs before pulling back dramatically in June on concerns the Fed would begin reining in its stimulus, which helped fuel 2013's gains.
While stocks closed higher on Monday on strong manufacturing and construction data, they ended well off their highs of the session. The S&P lost more than half of its gains, a sign of investor caution. More volatility is expected as the economy eventually moves to a no-stimulus environment.
In corporate news, alcoholic beverage company Constellation Brands Inc fell 2.4 percent to $51.90 in premarket trading after the company reported first-quarter earnings and revenue that missed expectations.
Sources said Pfizer Inc and Novartis AG may make preliminary bids for Onyx Pharmaceuticals Inc. On Sunday, Onyx turned down a roughly $10 billion offer from Amgen Inc.
Onyx jumped 1.6 percent to $133.40 before the bell.
Zynga Inc rose 3.2 percent to $3.23 in premarket trading after naming Don Mattrick, the head of Microsoft's Xbox business, as its chief executive. (Editing by Jeffrey Benkoe and Kenneth Barry)