US STOCKS-Higher open seen on oil drop, McDonald's profit

* Oil extends slide, adds to positive tone

* McDonald's gains on earnings beat

* Costco's profit warning on outlook stirs caution (Updates with McDonald's, AT&T prices rising before the open, updates prices)

By Ellis Mnyandu

NEW YORK, July 23 (Reuters) - U.S. stocks headed for a higher open on Wednesday as investors bet that a drop in oil prices would help sustain consumer and business spending, improving the outlook for economic growth and profits.

Lower oil prices could also allay the Federal Reserve's concerns about rising inflation.

Stronger-than-expected earnings from fast food restaurant chain McDonald's Corp (MCD.N: Quote, Profile, Research, Stock Buzz) also lent support to stocks. McDonald's shares rose more than 2 percent to $61.45 before the bell.

AT&T (T.N: Quote, Profile, Research, Stock Buzz), another Dow stock, posted profit in line with forecasts, sending its shares up 3.4 percent at $32.80.

Oil continued its downward trend. U.S. front-month crude fell $2.32, or nearly 2 percent, to $126.11 a barrel, on signs that Hurricane Dolly will miss major oil and gas production facilities in the Gulf of Mexico. For details, see [ID:nSP173429].