US STOCKS-Flat open seen as credit thaw offsets caution

* Credit thaw underpins sentiment before election day

* Manufacturing data eyed, automakers to post sales

* Wal-Mart rises after broker upgrade (Recasts first paragraph, updates prices)

By Ellis Mnyandu

NEW YORK, Nov 3 (Reuters) - U.S. stocks headed for a flat open on Monday as caution ahead of key economic data offset signs of more thawing in credit markets.

Trading was likely to be light as Americans prepare to head to the polls on Tuesday to choose the next U.S. president, with investors sidelined ahead of the outcome of the elections.

Wal-Mart Stores (WMT.N: Quote, Profile, Research, Stock Buzz), up nearly 2 percent before the bell, is among stocks to watch after a brokerage raised its rating on the retailer.

Shares of Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) slipped 0.5 percent to $92 before the bell after Merrill Lynch forecast the U.S. bank to post a fourth-quarter loss instead of the profit that Merrill had previously forecast.

The costs for bank to borrow dollars from each other again fell, sending three-month rates down for a 17th straight day and boosting hopes that steps to restore confidence in credit markets are paying off.

Free-flowing credit is seen as crucial in helping avert an acute downturn as investors fret about a global recession.

"The fact that interbank rates are really coming down is an indication that we should begin to see the credit markets respond and that's going to be the key," said Peter Cardillo, chief market economist at Avalon Partners in New York.

He added that the market has probably discounted an election victory of Democrat Barack Obama, heading into Tuesday's U.S. presidential election.

"It looks like we will have a Democratic president, so the election and the anticipation of the economic data is probably going to keep the market in a very tight range for most of the session today and tomorrow as we go to the polls."

S&P 500 futures SPc1 shed 2.40 points and were about even with fair value, a formula to evaluate pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 dipped 22 points and Nasdaq 100 NDc1 futures shed 2.00 points.

Monday's economic diary includes the Institute for Supply Management October manufacturing index at 10 a.m. (1400 GMT). Economists in a Reuters survey expect a reading of 41.5 versus 43.5 in September. But the highlight of the week will be Friday's report on October U.S. nonfarm payrolls.

J.P. Morgan Securities raised Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz), a Dow component, to "overweight" from "neutral." Goldman Sachs added Boeing (BA.N: Quote, Profile, Research, Stock Buzz) to a "conviction sell" list, according to theflyonthewall.com.

Obama heads into Tuesday's voting in a comfortable position, with Republican opponent John McCain struggling to overtake his lead in every national opinion poll and to hold off his challenge in about a dozen states won by President George W. Bush in 2004.

Obama leads McCain in six of eight key battleground states, including the big prizes of Florida and Ohio, according to a series of Reuters/Zogby polls released on Monday.

Obama holds a 7-point edge over McCain among likely U.S. voters in a separate Reuters/C-SPAN/Zogby national tracking poll, up 1 percentage point from Sunday. The telephone poll has a margin of error of 2.9 percentage points. [ID:nN03354084].

U.S. stocks ended one of their worst months on record on Friday but signs of further thawing in credit markets sparked a search for bargains. (Editing by James Dalgleish)