U.S. stock index futures pointed to a flat open on Monday, following a strong rally to end last week's session, when the Nasdaq closed at an 18-month high on better-than-expected February payroll data.

On Friday, the government said 36,000 U.S. jobs were lost in February, compared with forecasts for 50,000, resulting in a rally that pushed the Dow and S&P to close at six-week highs.

People thought the jobs number was going to be terrible, so right now there's not as much pessimism as there was, said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.

Kaufman said while the markets were up on a continuation of the rally, we're nearing the point where we could be overbought, with less near-term upside potential.

S&P 500 futures added 0.3 points but were below 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 4 points, and Nasdaq 100 futures rose 1.75 points.

American International Group Inc agreed to sell its Alico foreign life insurance unit to MetLife Inc for about $15.5 billion, leaving AIG with a substantial minority stake in MetLife. AIG rose 3.3 percent to $29.02 before the bell.

Dow component McDonald's Corp rose 1 percent to $64.30 in premarket trading after the hamburger chain reported comparable-store sales increased 4.8 percent in February.

Applied Materials Inc gained 2.4 percent to $12.59 before the bell after it said its board approved a dividend increase and $2 billion stock buyback program.

U.S. Steel Corp rose 2.3 percent to $60.24 before the bell after Goldman Sachs upgraded the company to buy. AK Steel Corp was cut to neutral, sending the shares down 1.7 percent to $24.45.

Late Friday, Hewlett-Packard Co lowered its first-quarter results by 3 cents per share due to litigation involving EDS, which it bought in 2008.

In overseas markets, Japan's Nikkei average <.N225> rose 2.1 percent to a six-week closing high on Monday, with exporters up on a weaker yen, while European shares <.FTEU3> inched lower on weakness in pharmaceutical stocks.

Toyota Motor Corp's <7203.T> president said Monday he believed North American sales could recover in March after a sharp decline last month following a safety crisis that led to a massive recall.

H&R Block Inc is the sole S&P 500 company scheduled to report quarterly results on Monday, while the only economic data will be the February employment trend number.

With the Friday rally, all three indexes are now positive for the year. Last week the Dow rose 2.3 percent, the Nasdaq added 3.9 percent, and the S&P 500 climbed 3.1 percent.

(Editing by Jeffrey Benkoe)