Battered bulls watch rates again

NEW YORK (CNNMoney.com) -- Continued concerns about bond yields could make it difficult for U.S. stocks to extend their late-week rebound from a brutal sell off.

Stock futures slid in early trading Monday, although a comparison to fair value pointed essentially a flat open, as it wavered between slightly higher and slightly lower. Stocks rebounded Friday, ending a three-day sell-off that had trimmed more than 3 percent off each of the major indexes on interest rate worries.

Treasury prices fell, lifting the yield of the of the 10-year note to 5.14 percent from 5.10 percent late Friday. That closely-watched yield had reached as high as 5.25 percent earlier in Friday's session.

Peter Cardillo, chief market economist of Avalon Partners, said that stock investors will likely be cautious Monday as they try to see what's going to happen to bond yields.

"We need to see rates begin to stabilize before we see any improvement in market sentiment," said Cardillo, who said he's expected a flat open for stocks. He said it's unlikely rates will show that kind of stability until after two key inflation readings later this week on wholesale and retail inflation.

"Unfortunately, top line inflation could be on the ugly side," said Cardillo.

Oil prices rebounded after the sharp drop on Friday, taking it above the $65 a barrel benchmark once again. U.S. light crude rose 50 cents to $65.26 a barrel.

Stocks in Europe rose on deal news and Asian stocks tiptoed higher. The dollar was higher against the euro but slightly lower versus the yen.

In major corporate news, Google (Charts, Fortune 500) has written to U.S. and state antitrust authorities arguing that Microsoft's (Charts, Fortune 500) Vista operating system disadvantages rivals and is in violation of Microsoft's antitrust settlement, according to a report in the Wall Street Journal.

The Journal also reported that General Electric (Charts, Fortune 500) and Microsoft discussed buying its corporate parent, Dow Jones & Co. (Charts) to combine it with some parts of GE's NBC Universal unit, but that haven't been able to reach an agreement. Media conglomerate News Corp. (Charts, Fortune 500) has made an unsolicited $5 billion bid for Dow Jones, hoping to use it to help launch its own all-business cable network which would compete with NBC Universal's CNBC. GE and Microsoft are partners on all-news channel MSNBC.

Chrysler Group, which is in the process of being sold by DaimlerChrysler (Charts), has exceeded its initial target for the number of factory workers willing to take buyouts to leave the automaker as part of a turnaround effort, according to a report by Reuters late Friday.