* Chevron deal lifts energy sector
* Priceline jumps after earnings
* Euro erases losses, commodities firm
* Futures up: S&P 2.1 pts, Dow 17 pts, Nasdaq 8 pts (Updates market activity, adds Priceline.com share price)
By Edward Krudy
NEW YORK, Nov 9 (Reuters) - U.S. stocks were set for a higher open on Tuesday as mergers and acquisitions activity and strong corporate earnings looked to extend a recent rally that has driven indexes to two-year highs.
Shares in Atlas Energy Inc jumped 36 percent to $43.13 after Chevron Corp said it will buy the U.S. natural gas producer for $4.3 billion. News of the deal lifted other energy companies. Cabot Oil & Gas Corp rose 5 percent to $34.18.
Yahoo Inc jumped 5 percent to $17.27 premarket after a report it may be a takeout target. Jack Ma, founder of Alibaba Group, has been approached by a group of private equity investors to gauge his interest in taking part in a bid to buy Yahoo, a source said.
"We definitely see M&A accelerating here," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "In our conversation, with (corporate) management, they increasingly feel under pressure ... for maintaining very high cash levels in a low interest rate environment."
On the earnings front, Priceline.com Inc rose 8.4 percent to $421.12 after the online travel agency posted stronger-than-expected quarterly earnings late Monday and at least six brokers raised their price targets on the stock.
Although looking to extend a recent rally, the S&P 500 faces resistance around 1,228, which would retrace 61.8 percent of the decline between its highs in 2007 and the 12-year low in March 2009. This is one of the Fibonacci retracements that chartists follow and can coincide with buying or selling markers. The index closed at 1223.25 on Monday.
S&P 500 futures rose 2.1 points and were above 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 gained 17 points, and Nasdaq 100 futures added 8 points.
The weaker dollar lifted commodities. U.S. crude oil futures hit a two-year high, helped by bullish comments from an industry body, while copper reached its highest since mid-2008, also driven by falling inventories and supply concerns.
"I definitely think we are going to have commodities performing well if the dollar stays under pressure," said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.
Freeport-McMoRan Copper & Gold Inc rose 2 percent to $107.35, while Alcoa Inc, the biggest U.S. aluminum producer, rose 0.4 percent $14.02.
On the down side, Dean Foods Co fell 13.4 percent to $8.97 after the company said recent "price concessions ... will continue to impact year-over-year comparisons into 2011." Also, its chief financial officer will resign.