(Refiles to correct to "winding down" from "at the fag end" in paragraph four)
* NY Fed's Aug manufacturing activity hits lowest since 2009
* Oil prices head towards six-year lows
* Zulily soars on Liberty Interactive's $2.4 bln buyout offer
* Tesla jumps after Morgan Stanley upgrade
* Indexes down: Dow 0.65 pct, S&P 0.11 pct, Nasdaq 0.02 pct
By Tanya Agrawal
Aug 17 (Reuters) - Wall Street began the week lower on Monday after data showed a surprise fall in manufacturing activity in the state of New York in August.
The market was also weighed down by oil prices, which fell toward six-year lows as data showed Japan's economy, the world's third-biggest oil consumer, contracted in the second quarter.
The New York Fed's Empire State general business conditions index tumbled from 3.86 in July to -14.92 in August due to steep drops in new orders and shipments. Economists polled by Reuters had expected the index to rise to 5 this month. A reading above zero indicates expansion.
With the U.S. earnings season winding down and no major economic data due, investors will turn to Wednesday's minutes of the most recent Federal Reserve meeting for indications on how the U.S. central bank will react to the recent yuan devaluation and the further decline in oil prices.
The dollar index was up 0.2 percent at $96.72 and has been mostly higher on hopes that the Fed is readying to raise rates at its mid-September meeting.
At 10:17 a.m. EDT the Dow Jones industrial average was down 114.38 points, or 0.65 percent, at 17,363.02, the S&P 500 was down 2.27 points, or 0.11 percent, at 2,089.27 and the Nasdaq Composite was down 0.97 points, or 0.02 percent, at 5,047.27.
Five of the 10 major S&P 500 sectors were lower with the financial index's 0.4 percent fall leading the decliners.
U.S. stocks ended a volatile week higher on Friday after upbeat U.S. economic data and as euro zone finance ministers agreed to launch a third bailout program for Greece.
U.S. stocks have been stuck in a tight trading range since the beginning of the year and is expected to trade sideways for much of the year.
Goldman Sachs has said it expects the S&P 500 to end the year flat due to high starting valuation, negligible earnings growth, outflow from domestic equity mutual funds and modest economic growth.
With 92 percent of the S&P 500 companies having reported so far, second-quarter earnings are expected to have edged up 1.2 percent, while revenue is expected to have fallen 3.5 percent, according to Thomson Reuters data.
Cisco shares fell 1.5 percent to $28.58 after Morgan Stanley downgraded the stock to "equal-weight" from "overweight".
Tesla Motors rose 4.2 percent to $253.20 after Morgan Stanley raised its price target on the stock to $465 from $280 and said Tesla was its top pick among U.S. automakers.
Zulily soared 47.3 percent to $18.52 after John Malone's Liberty Interactive said it would buy the online retailer for $2.4 billion. Liberty was down 1.9 percent at $29.83.
Estee Lauder fell 1.8 percent to $87.26 after the cosmetics maker reported lower-than-expected quarterly sales.
KKR fell 2.2 percent to $22.36 after its subsidiary Samson Resources said on Friday it expects to file for bankruptcy protection.
Declining issues outnumbered advancing ones on the NYSE by 1,794 to 1,009. On the Nasdaq, 1,515 issues fell and 1,004 advanced.
The S&P 500 index showed six new 52-week highs and 12 new lows, while the Nasdaq recorded 27 new highs and 48 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)