NEW YORK (MarketWatch) -- U.S. financial stocks rallied again on Tuesday after the U.S. unveiled plans to invest directly in the nation's banks and expand deposit insurance in a coordinated effort to thaw frozen credit markets.
The Financial Select Sector SPDR , and ETF that tracks the financial stocks in the S&P 500, climbed 7% in early trade.
Morgan Stanley shares again stood out, rising another 30% on the back of an 85% gain in the previous session. The shares have more than doubled since the Friday close.
XL Capital , the insurer, led all financial gainers after it pre-announced earnings and said it believes it has enough capital to operate. Its shares rose 48%.
Treasury Secretary Henry Paulson announced Tuesday that the government would invest $250 billion in banks to encourage them to begin lending again.
Paulson said he regretted having to take the actions, but said they are "what we must do to restore confidence to our financial system."
The heart of the plan is the determination that the government should spend $250 billion to buy temporary ownership stakes in major U.S. banks in an effort to recapitalize the financial sector. Nine banks have already requested government capital, Paulson said.
The money will come from the $700 billion authorized by Congress. The White House announced that President Bush had signed the letter releasing the money. See full story.
