US STOCKS-Flat Wall St open seen as oil, Lowe's weigh

(Updates prices)

* U.S. front-month crude nears record, above $127

* Lowe's profit falls, outlook cut, stock slips early

* Microsoft pursues alternative deal with Yahoo

By Ellis Mnyandu

NEW YORK, May 19 (Reuters) - U.S. stocks were set to open little changed on Monday as near-record oil prices fueled caution about inflation and consumer spending, while Lowe's Companies (LOW.N) added to concerns about the housing slump.

Lowe's, the second-largest U.S. home improvement chain, posted a drop in quarterly profit and slashed its full-year outlook, sending its stock down more than 2 percent before the bell to $23.91. For details see [ID:nWNAS4576].

Microsoft Corp (MSFT.O) is among stocks to watch following news that the software maker had resumed talks with Yahoo Inc (YHOO.O), whose shares edged up 1.4 percent to $28.05 before the bell.

U.S. crude for June delivery CLc1 was up 87 cents, or nearly 1 percent, at $127.16 a barrel in electronic trade after ending at a fresh record above $126 on Friday on a weakening dollar.

While higher oil prices were set to boost shares of energy companies including Exxon Mobil Corp (XOM.N), retailers and other consumer-oriented plays could be under pressure as investors worry that fallout from higher energy prices would crimp consumer spending.

The other worry is that soaring energy costs may lead to a build-up in price pressures, raising the U.S. Federal Reserve's discomfort with inflation.

"The market is just continuing to track to the price of oil which right now is moving back up," said Peter Cardillo, chief market economist at Avalon Partners in New York. "We're possibly headed for a mixed session."

S&P 500 futures SPc1 edged up 0.1 point, and were about even with 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 DJc1 dipped 3 points, and Nasdaq 100 NDc1 futures inched up 2 points.

Technically, the broader market has come up against overhead resistance that has kept it stuck in a narrow trading range for weeks. The S&P 500 will start Monday's session 2 points away from breaking above its 200-day moving average, a key measure of the market's trend.

Microsoft said on Sunday it had proposed an alternative deal to Yahoo rather than an outright acquisition of the Internet media firm as it had originally proposed.

Last week financier Carl Icahn launched a proxy campaign to replace Yahoo's board with directors who would reopen talks with Microsoft.

Yahoo said it continued to consider strategic alternatives and was "open to pursuing any transaction which is in the best interest of our stockholders." [ID:nN18490901].

Shares of Amazon.com Inc (AMZN.O) were up 3.6 percent at $79.25 before the bell after Goldman Sachs raised its price target on the stock and added the Web retailer to its "Americas conviction buy" list.

April leading economic indicator data is due at 10 a.m. (1400 GMT). (Editing by James Dalgleish)