By Ellis Mnyandu
NEW YORK (Reuters) - Stocks headed for a surge at the open for a second straight day on Tuesday after the Treasury Department said it would inject $250 billion in major banks, calming fears about stability in the U.S. financial system.
More signs in the credit markets that the cost of lending between banks had eased added to the positive tone. That came a day after Wall Street roared back from its worst week ever with one of its best single days ever on Monday.
The department's plan involves buying stakes via senior preferred, nonvoting shares in the largest U.S. banks, including Bank of America Corp
"The bank plan is another step in the right direction. The markets have been looking for it, and they're reacting positively to it," said Jim Awad, chairman of W.P. Stewart & Co. in New York.
"I expect it to add ... stability to the financial and credit markets, but it's important to not get overly euphoric because we still have to enforce it."
S&P 500 futures jumped 31.9 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 climbed 247 points and Nasdaq 100 futures gained 17.5 points.
Washington's plan to take stakes in major banks mirrors steps already taken by Britain and announced by other governments around the world, including Germany and France, to stabilize the financial system and restore confidence after recent market turmoil.
The Financial Select Sector SPDR
Shares of Citigroup jumped 16.8 percent to $18.40 before the bell, Bank of America Corp
The interbank cost of borrowing three-month dollars had its biggest fall since March on Tuesday and three-month euro rates the biggest fall this year, adding to hopes that credit markets will unfreeze.
In earnings news, Johnson & Johnson
(Additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)
