Futures higher early Monday, extending Friday's advance

NEW YORK (Reuters) - U.S. stock index futures were higher early Monday, indicating Friday's rally could continue as investors grow more confident in the economy's strength and Federal Reserve policy.

* The S&P 500 stock index posted its best day since August on Friday, lifted by a stronger-than-expected jobs report that boosted optimism about the economy, though the Federal Reserve was not seen as speeding up its timeline for raising interest rates.

* As of Friday's close, the S&P 500 was about 2.2 percent away from its record close. The Russell 2000 was down 8.6 percent from its record. Last week, the small-cap index fell more than 10 percent from its peak, putting the index into correction territory, raising concerns the weakness could spread to the broader market.

* The S&P 500 had fallen 4.6 percent from its record intraday high to its recent intraday low. While the decline is less than half of the 10 percent drop that indicates a correction, which the benchmark index hasn't undergone since 2012, it fell under its 150-day moving average for the first time since November 2012. While it subsequently rebounded back above that level, it remains under its 50-day average, and that level could serve as resistance against further gains.

* Market volatility has been higher of late, with equities notching big swings amid unrest in Hong Kong and concerns about Ebola in the United States. Those issues could continue to drive trading. The CBOE Volatility index (VIX) ended Friday at 14.55, well below its long-term average of 20.

* Investors are looking ahead to the start of the U.S. earnings season, which will give a better sense as to how corporations are faring in the current environment. Alcoa Inc (N:AA), Costco Wholesale Corp (O:COST) and Monsanto Co (N:MON) are all scheduled to report this week, though the season begins in earnest next week.

U.S. stock futures snapshot at 6:43 am ET:

© Reuters. Traders work on the floor of the New York Stock Exchange

* S&P 500 e-minis were up 5.25 points, or 0.27 percent, with 128,969 contracts changing hands.

* Nasdaq 100 e-minis were gaining 11 points, or 0.27 percent, in volume of 20,003 contracts.

* Dow e-minis were up 47 points, or 0.28 percent, with 21,840 contracts changing hands.

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Dollar rally stalls after record run higher

The dollar pulled back from four-year peaks against a basket of other major currencies on Monday, as investors consolidated gains after a strong jobs report on Friday fuelled expectations for an early hike in interest rates.

It notched up its twelfth consecutive weekly gain last week, the longest rally since the index was created in 1971.The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was down 0.31% to 86.51, off Friday’s four-year peaks of 86.79.

The dollar strengthened across the board after data on Friday showed that the U.S. economy added 248,000 jobs in September, well ahead of forecasts for jobs growth of 215,000. The unemployment rate ticked down to 5.9%, the lowest level since July 2008.

The dollar has rallied in recent months, amid expectations that the Federal Reserve is growing closer to raising interest rates, while central banks in Europe and Japan look likely to stick to a looser monetary policy stance.

USD/JPY was down 0.40% to 109.33, off Friday’s highs near six-year highs of 109.86.

The Bank of Japan was to conclude its two-day policy meeting on Tuesday and was expected to leave monetary policy on hold, despite a recent slew of weak economic data.

The euro was also higher, with EUR/USD rising 0.33% to 1.2556, easing back from Friday’s two year trough of 1.2499.

The euro’s gains came in spite of data on Monday showing that German factory orders fell 5.7% in August, compared to expectations for a 2.5% decline. It was the largest drop since early 2009, adding to concerns over the outlook for the euro zone’s largest economy.

The European Central Bank refrained from implementing additional stimulus measures at its meeting last week, indicating that it will wait to see the effects of recent stimulus measures on the region’s economy.

The pound eased back from 11-month lows, with GBP/USD edging up 0.12% to 1.5988, while USD/CHF slid 0.22% to 0.9650.

The commodity linked dollars also gained ground, with AUD/USD rising 0.66% to 0.8732 ahead of Tuesday’s rate review by the Reserve Bank of Australia.

NZD/USD added 0.26% to trade at 0.7782, while USD/CAD was down 0.28% to 1.1216.

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