Futures pointed to a flat open on Wall Street Monday. Microsoft's bid for Yahoo, seen as a sign that many equities are attractively priced relative to value, offered investors some inspiration.
Stocks surged in Asia as the Lunar New Year holiday began and European markets were higher in afternoon trading.
U.S. stocks are coming off of their best week in nearly five years last week. "After having had such a difficult market and seeing it recovering, it's time to contemplate whether all the problems have disappeared," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey, told Reuters.
"Microsoft's bid for Yahoo, though, brings to the forefront the fact that the market still trades on valuations. There's a feeling that there's been deeper discounting in the market place than is warranted by the fundamentals."
Microsoft will wait for Yahoo's board to decide what is best for the company's future, as its offer is meant to create a very competitive business, a company official told CNBC on Monday, after reports that Google offered to help Yahoo fend off the $44.6 billion bid.
Microsoft's proposed acquisition of Yahoo would marry the world's biggest software maker with one of the leading Internet media companies, shaking up the market for online services such as email and advertising.
The Wall Street Journal reported on its Web site on Sunday that Google's chief executive Eric Schmidt called Yahoo's chief executive Jerry Yang to offer his company's help in any effort to thwart Microsoft's bid. Neither company had any comment on the report.
But Google fired back Sunday at Microsoft's $44.6 billion bid to acquire Yahoo, accusing the software giant of seeking to extend its computer software monopoly deeper into the Internet realm.
David Drummond, a Google senior vice president and its chief legal officer, said in a blog post that the combination of Microsoft and Yahoo could undermine the open competition that has fueled Web innovation.
Analysts warned the offer was still in very early stages and talk about a possible Google counter-attack may be unfounded.
"It's reactive tactics coming from inside Yahoo and Google," Aleksandra Bosnjak analyst at StrategyEye Digital Media, told "Worldwide Exchange."
"What we see here are industry shocks. I would not really think about it seriously yet, because it's all very speculative," Bosnjak said.
In other news, Wendy's said its fourth-quarter earnings more than quadrupled from a year-earlier loss from discontinued operations despite sluggish sales and higher commodity cots. The fast-food chain has been considering a possible sale for nearly a year.
Meanwhile, Intel shares were trading higher before the opening bell, following a report in Barron's that said the chip maker will probably generate double-digit annual earnings growth over the next several years and extend its lead over Advanced Micro Devices .
In economic news, factory orders data are due at 10:00 am New York time and they are estimated to have risen by 2.6 percent in December from 1.5 percent.
And President George W. Bush is likely to acknowledge that a slowing U.S. economy will lead to a higher budget deficit this year and in 2009, as he unveils a $3 trillion fiscal 2009 spending plan that would boost military funding.
--Reuters contributed to this report.