Wall Street was set to open nearly 1 percent higher on Tuesday as rising commodity prices and an uptick in merger and acquisition activity fueled hopes the economy is strengthening.

Kraft Foods Inc said it was intent on pursuing Britain's Cadbury Plc , which rejected a bid from the U.S. company. Analysts said Kraft, North America's biggest food group, might have to raise its 10.2 billion pound ($16.7 billion) offer by up to 40 percent. Kraft's shares were down 5.7 percent at $26.50 in premarket trading.

You get some M&A activity, and the market perceives that as potentially the start of more, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.

It's been talked about a lot that you should see as you come out of the bottom of a recession those that are in good shape gobbling up those that are struggling.

Natural resource shares could see a boost as the price of spot gold rose above $1,000 an ounce to its highest level since March 2008 on a wave of technical momentum and dollar weakness.

Energy shares could benefit as oil futures jumped 3.5 percent to top $70 a barrel ahead of an OPEC meeting. Analysts said no change in output limits was expected.

Commodities are again becoming a barometer for the market, said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.

Strong commodities suggest a healthy economy, and therefore stocks will follow.

Shares of General Electric Co gained 4 percent to $14.43 premarket after J.P. Morgan Securities upgraded the stock to overweight from neutral, saying it was one of the last stocks for which a little good news could still go a long way.

S&P 500 futures rose 9.80 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 added 78 points, and Nasdaq 100 futures climbed 14 points.

Shares of iPod maker Apple Inc rose 1.5 percent to $172.80 ahead of the opening after Morgan Stanley raised its price target to $200 from $195. The firm also raised the U.S. systems and PC hardware sector to attractive from in line.

Asian markets rose, with China's benchmark Shanghai Composite <.SSEC> closing 1.7 percent higher after a senior official said China's economy is seeing more signs of economic strength. U.S. markets have taken a cue from Chinese stocks after a recent correction in Shanghai stocks raised concerns a selloff could spill over to Wall Street.

U.S. stocks closed higher on Friday as investors focused on the bright side of a mixed payrolls report that showed smaller-than-expected job cuts in August, although the unemployment rate hit a 26-year high. U.S. markets were closed on Monday for the U.S. Labor Day holiday.

(Reporting by Leah Schnurr; editing by Jeffrey Benkoe)