Now

that's

a merger Monday.

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If Wall Street was still on the fence about whether stocks could continue to build on the heels of last week's warp-speed technology "correction,"

America Online

(AOL)

and

Time Warner

(TWX)

have pretty much cleared up the matter with the surprise news that they will

combine in an all-stock deal worth $125 billion. The news has lit a fire under the

S&P 500 futures, which, at 9:05 a.m. EST, were up 13.3, about 18 points above fair value. That indicates a lot of strength for stocks in the early going.

The

Nasdaq 100

futures, thinly traded but still a decent gauge of tech sentiment, were up 82 to 3639.5.

Though the companies are calling the deal a merger of equals, AOL shareholders will control 55% of the new firm. After moving as high as 100, shares of Time Warner were lately trading at 92 1/2 on

Instinet

, up from their Friday close of 64 3/4. But the premarket crowd has been considerably cooler on AOL, which was getting bids at 73, well off its morning high of 85.

Predictably, the bond market, which has been moving in the opposite direction of stocks so far this year, wasn't showing much interest in AOL/Time Warner. The 30-year Treasury was lately down 16/32 to 94 3/32, putting the yield at 6.58%. No major economic data are scheduled before Thursday's

Producer Price Index

and

retail sales

report.

Whether stocks can hold early strength is tough to say. Few would venture that 3 days of profit-taking in technology stocks have sufficiently pruned the excesses from the fall run-up, or that Friday's rebound was enough to mark a firm bottom to the selling. And volatility has been such that 150-point swings in the

Nasdaq Composite Index

are beginning to seem par for the course.

"The S&P 500 and the

Dow

made better bottoms," said Brian Belski, chief investment strategist at

George K. Baum & Co.

in Kansas City, Mo. "The Nasdaq didn't have as much volume at the lows, and there's a lot of doubt in terms of the extension of a lot of these stocks."

"The Nasdaq is going to have something called a round-number phenomenon," said Belski. "Once this thing starts rolling today -- we're going to open over 3900 and could break through 4000 -- investors are going to start thinking they're missing something again.

But the international mood is certainly conducive to sustained strength here at home. The large European markets were booming higher in early afternoon trading, paced by the Paris

CAC

, which was up 161.07, or 2.9%, to 5700.68. Frankfurt's

Xetra Dax

was up 171.50, or 2.5%, to 6952.46.

London's

FTSE

was up 118.2, or 1.8%, to 6623.0. In the wake of the AOL-Time Warner announcement, technology and media shares in the U.K. were soaring, adding to the strength in stock markets across Europe. At 11:40 GMT,

Pearson

was up 14.9% to 1956 pence;

EMI

had gained 13.3% to 672 pence;

Granada Group

was 12.0% higher to 656 pence;

BSkyB

had jumped 11.0% to 998.5 pence; and

Reed International

(RUK)

had advanced 10.6% to 494 pence.

The euro was slightly softer against the dollar, lately trading at $1.0233.

Tokyo

markets were closed for a national holiday. But that didn't stop other Asian markets from powering higher, led by Hong Kong's

Hang Seng

, which closed up 442.52, or 2.9%, to 15,848.15. Meanwhile, Singapore's

Straits Times

inched up 27.64, or 1.2%, to 2433.68; Korea's

Kospi

jumped 38.59, or 4.1%, to 987.24; and Taiwan's

TWSE

index closed 257.13, or 2.9% higher, to 9102.60.

The greenback inched lower against the yen overnight, moving to 104.43 yen late in Asian trading. The dollar had lately firmed to 105.3, however.

For a look at stocks in the preopen news, see Stocks to Watch, now published separately.