U.S. Stock Futures Rise as Government Mulls Plan to Ease Crisis

By Patrick Rial and Shani Raja

Sept. 19 (Bloomberg) -- U.S. stock-index futures rallied, following the biggest advance by equities on Wall Street in six years, as the government worked on plans to ease the crisis in financial markets.

Morgan Stanley, the second-largest independent securities firm in the U.S., rose 11 percent in after-hours trading in New York. Wachovia Corp. added 5.2 percent, extending a 59 percent gain during regular trading hours. The companies have held merger talks, according to a person familiar with the matter.

``The resolve to fundamentally solve the problem is intensifying, which suggests there's going to be a bit of a floor under share prices,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages $81 billion in Sydney.

Standard & Poor's 500 Index futures expiring tomorrow climbed 2.7 percent, to 1,235.40 as of 2:59 p.m. in Tokyo. Dow Jones Industrial Average futures added 1.9 percent to 11,199.

The S&P 500 rose 4.3 percent yesterday, the steepest rally since October 2002. The gain trimmed its loss this week to 3.6 percent. Declines came as bank lending seized up following Lehman Brothers Holdings Inc.'s bankruptcy filing and the U.S. government's takeover of American International Group Inc.

The U.S. Securities and Exchange Commission may ban short- selling in the shares of Wall Street brokerages, a person familiar with the matter. The move may help calm markets rattled by the ongoing financial crisis. Short sellers try to profit by selling borrowed stock in a bet the price will fall and it can be bought back at a lower price in the future.

Short Selling Ban?

The possible ban on short selling comes after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke met with lawmakers yesterday to push a plan that would move troubled assets from the balance sheets of American financial companies into a new institution.

Congressional leaders meeting with Paulson and Bernanke said they will work to pass legislation soon. The initiative is aimed at removing the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression.

Morgan Stanley gained 11 percent to $25.01. Wachovia advanced 5.2 percent to $15.26. Citigroup Inc., the fourth- biggest U.S. bank by market value, gained 3.9 percent to $17.30.

Oracle Corp. jumped 6.7 percent to $20. The world's second- largest software maker forecast second-quarter earnings that topped some analysts' projections.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.