* Financials lead global surge on plans to stabilize mkts
* U.S. SEC slaps temporary ban on short sales
* US Treasury to back money market mutual funds
* Citigroup considering bid for WaMu-WSJ
* Financial sector ETF surges before open
(Adds quote, updates prices)
By Ellis Mnyandu
NEW YORK, Sept 19 (Reuters) - U.S. equity index futures
soared on Friday, indicating Wall Street will add to its gains
after the best day in six years, as investors cheered a series
of sweeping steps by governments worldwide to contain the
spiraling credit crisis.
U.S. authorities, led by U.S. Treasury Secretary Henry
Paulson, are working on a comprehensive solution to mop up
hundreds of billions of dollars of bad debt from banks' balance
sheets that has choked up the global financial system.
Early Friday U.S. securities regulators joined regulators
from other countries in temporarily banning short sales of
financial shares. In addition, the U.S. Treasury said it will
establish a program to guarantee money market fund holdings.
"The ban on the short sales is what's having the immediate
impact on the market. That should calm the market down," said
Paul Mendelsohn, chief investment strategist at Windham
Financial Services in Charlotte, Vermont.
"Anybody who has been shorting these financial stocks is
going to get burnt in here. What authorities are trying to do
is just buy enough time for the market to settle down and for
the details of the Paulson plan to be understood, how long it
would take to implement and what it means for the banks."
S&P 500 futures <SPc1> jumped 45.80 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 <DJc2> climbed
320 points and Nasdaq 100 <NDc1> futures leaped 53.25 points.
Heading into the final day of one of the most momentous
weeks in Wall Street history, the benchmark Standard & Poor's
500 <.SPX> looked set to jump more than 3 percent when the
opening bell rings.
A widely followed exchange-traded fund that tracks the S&P
500 financial sector, the Financial Select Sector SPDR <XLF.A>,
rose 17 percent in U.S. pre-market trading.
Shares of Washington Mutual <WM.N> climbed more than 35
percent to $4.04 before the bell after the Wall Street Journal
reported that Citigroup <C.N> was considering making a bid for
the U.S. savings and loan. For details, see []
The Securities and Exchange Commission slapped the ban on
short selling of 799 financial stocks, a move that analysts
said would help stabilize the market following tumult spawned
by the bankruptcy of Lehman Brothers <LEH.N> and the bailout of
insurer American International Group <AIG.N> .
Paulson and Federal Reserve Chairman Ben Bernanke plan to
work through the weekend with Congress on a plan to set up an
entity that will take bad assets off the balance sheets of
banks that has choked the financial system.
That entity would be similar to the Resolution Trust Corp,
which was set up to clean up bad debts from the savings and
loan crisis in the late 1980s at a $400 billion cost to
taxpayers. []
The SEC ban on short sales, issued early on Friday, ends on
Oct. 2 but can be extended beyond 10 days if deemed necessary.
On Thursday, Britain's Financial Services Authority imposed a
four-month ban on short selling financial stocks.
(Reporting by Ellis Mnyandu, Editing by Kenneth Barry)
