Wall Street to open lower on Iraq turmoil

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks were poised for a modestly lower open on Monday, on the heels of the S&P 500's biggest weekly drop since early April, as turmoil in Iraq sparked investor caution.

* The United States is contemplating talks with its arch enemy Iran to support the Iraqi government in its battle with Sunni Islamist insurgents, who routed Baghdad's army and seized the north of the country over the past week. A U.S. defense official said a navy ship with 550 Marines on board had entered the Gulf to support possible U.S. action.

* Geopolitical tensions in Ukraine also flared as Russian natural gas exporter Gazprom reduced supplies to Ukraine after Kiev failed to meet a deadline to pay off its gas debts in a dispute that could disrupt supplies to the rest of Europe.

* The New York Fed's "Empire State" general business conditions index rose to 19.28 this month, the strongest read since June 2010, topping the May read of 19.01. Analysts polled by Reuters had forecast a reading of 15.

* At 9:15 a.m. (1315 GMT), industrial production data for May is due and the NAHB housing market index is set to be released at 10:00 a.m. (1400 GMT). Industrial production is expected to show an increase of 0.5 percent against the 0.6 percent decline in the prior month. The housing market index is expected to climb to 47 from a prior 45.

* S&P 500 e-mini futures were down 3.25 points and fair value - a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract - indicated a lower open. Dow Jones industrial average e-mini futures fell 30 points and Nasdaq 100 e-mini futures lost 5.75 points.

* Merger activity continued to be active. Medical device maker Medtronic Inc agreed to buy Dublin-based Covidien Plc for $42.9 billion and shift its executive headquarters to Ireland in the latest move by U.S. firms to harvest lower tax rates abroad. Medtronic shares gained 5.8 percent to $64.21 in premarket while Covidien jumped 30 percent to $93.60.

* Williams Companies climbed 11.5 percent to $52.60 before the opening bell. The pipeline operator said it agreed to acquire control of Access Midstream Partners LP for $5.99 billion as the first step toward merging it with its operations. Jefferies subsequently upgrade Williams to a "buy" rating.

* Level 3 Communications said it would buy Internet services provider tw telecom Inc for $40.86 per share in a cash and stock deal. Level 3 shares gained 3.2 percent to $45.10 in premarket and tw telecom surged 12.3 percent to $40.80.

(Editing by Bernadette Baum)