* S&P 500 hit record close Friday after three weeks of gains
* Apple to report results after market closes
* Merck shares fall in premarket after results
* Futures up: Dow 45 pts, S&P 2.1 pts, Nasdaq 7.25 pts
By Ryan Vlastelica
NEW YORK, Oct 28 (Reuters) - U.S. stock index futures edged higher on Monday, indicating that the rally that took major indexes to record highs would continue with the latest earnings, including Apple's much-anticipated results.
The largest U.S. company by market cap, Apple Inc will report after the market closes. Investors want to see the amount of sales of the company's low-cost iPhone.
The S&P 500 has hit a series of record highs over the past two weeks, including Friday. However, further gains may be harder to come by given the market's rapid advance this year.
The gains have largely come from expectations that the U.S. Federal Reserve would not slow its stimulus policies for several months. The Fed's policy-making committee will meet Tuesday and Wednesday and, according to analysts, is extremely unlikely to alter its policies.
"In the short-term we're overbought and due for a pullback, but with the Fed continuing stimulus investors are looking for a reason to sell and they can't find one," said Adam Sarhan, chief executive of Sarhan Capital in New York.
Corporate earnings have also given investors reason to buy. While the third-quarter results have been mixed and revenues in many cases below expectations, bellwethers like Microsoft and Amazon.com rallied last week.
Noting that Apple shares are down slightly this year, Sarhan said that "from a valuation standpoint, Apple is something of an underdog.
"The stock is trying to move back up after consolidating, and since it is such a large percentage of the Nasdaq, what's good for Apple is good for the market at large."
S&P 500 futures rose 2.1 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 45 points and Nasdaq 100 futures rose 7.25 points.
The S&P 500 is up 23.4 percent so far this year, just shy of the 23.5 percent gain it posted in 2009. Surpassing the 2009 record would give the index its biggest annual gain in a decade.
Much of those gains have come recently, with both the Dow and S&P 500 posting their third straight week of gains last week. The Nasdaq has climbed for seven of the past eight weeks while the Russell 2000 index of small cap stocks registered its eighth week of gains last week, its longest streak since 2003.
Merck & Co reported third-quarter earnings that beat expectations, though sales of its Januvia diabetes treatment fell, raising concerns about growth prospects for its biggest product. Shares of the Dow component fell 1.3 percent to $45.95 in premarket trading.
Biogen Idec posted a rise in its third-quarter earnings.
Based on the latest Thomson Reuters data, S&P 500 earnings are expected to have risen just 3.4 percent in the third quarter, with 69 percent of companies reporting earnings above analysts' expectations. Revenue growth is seen at 2.2 percent for the quarter, with just 54.2 percent beating sales estimates, below the long-term average of 61 percent.
Investors will also look ahead to September pending home sales, due at 10 a.m. (1400 GMT), which are seen rising 0.1 percent, a rebound from the 1.6 percent decline last month.
In company news, cable television network AMC Networks Inc on Monday said it agreed to buy Chellomedia, the international content unit of Liberty Global Inc, for about $1.04 billion.