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) also lent support to stocks. McDonald's shares rose more than 2 percent to $61.45 before the bell.

AT&T (T.N), 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].

"It's all about oil," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey. "The lower oil moves, the more support it's providing to a cross section of stocks."

S&P 500 futures SPc1 rose 5.80 points and were above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures DJc1 jumped 36 points, and Nasdaq 100 NDc1 futures gained 7.50 points.

With oil's drop, shares of big manufacturers and airlines were likely to advance, along with technology stocks and financial companies.

But Costco Wholesale Corp (COST.O), the No 1 U.S. warehouse club operator, could cause caution after it forecast a fourth-quarter profit below Wall Street estimates, citing pressure from higher energy costs and lower margins. [ID:nBNG266363]

Costco shares dropped 10.2 percent to $64.65 before the bell. In addition, broker actions and analyst research comments on outlooks for banks and other financial services companies, including Citigroup (C.N) might also keep a lid on gains.

Fox-Pitt, a brokerage, cut its third-quarter profit view for Citigroup to reflect $2.2 billion in additional write-downs. Merrill Lynch cut its rating on Washington Mutual WM.N, a day after the largest U.S. savings and loan, posted a $3.33 billion second-quarter loss and mounting mortgage delinquencies forced it to set aside more money for loan losses.

Washington Mutual shares were down 2.2 percent at $5.69 before the bell. (Editing by Kenneth Barry)