Investors build up confidence

LONDON (CNNMoney.com) -- U.S. stocks are likely to extend gains on Thursday after Bank of America agreed to invest in troubled mortgage lender Countrywide Financial, helping to calm jitters in the mortgage sector.

At 6:28 a.m. ET, Nasdaq and S&P futures were higher, with a comparison to fair value pointing to gains for Wall Street at the start.

Bank of America (Charts, Fortune 500) has taken a $2 billion stake in Countrywide, helping to ease worries over the future of the nation's largest mortgage lender. News of the deal first broke late Wednesday.

Worries over Countrywide's health escalated last week after the company was forced to tap an $11.5 billion line of bank credit after it couldn't raise funds the way it normally does in the markets.

The liquidity squeeze has forced several mortgage lenders out of business. Lehman Brothers (Charts, Fortune 500) said Wednesday that it was closing its subprime unit, and earlier this week Capital One Financial Corp. (Charts, Fortune 500) shut its lending unit.

Bank of America's investment in Countrywide is likely to shore up confidence in the mortgage sector and help stocks maintain their recent momentum. Shares of Countrywide (Charts, Fortune 500) surged 20 percent in after-hours trading Wednesday.

Stocks jumped Wednesday on rising hopes that the Fed would cut the target for its key short-term interest rate at its next meeting on Sept. 18. Markets were also lifted by signs that takeover activity had not stalled completely.

On the economic front, no major reports are due in the U.S., but several retailers are due to post earnings, including bookseller Barnes & Noble (Charts, Fortune 500) and Gap (Charts, Fortune 500).

Hopes that the worst of the credit crunch was over helped stocks rally overseas. Asian markets soared, boosted by Wall Street's gains and the Bank of Japan's decision to leave rates unchanged. In Europe, stocks advanced in morning trading.

Treasury prices kept falling as renewed confidence helped stem the recent flight to safety. The yield on the benchmark 10-year note rose to 4.70 percent from 4.65 percent late Wednesday. Bond prices and yields move in opposite directions.

Oil prices eased, with U.S. light crude for September delivery falling 44 cents to $69.70 a barrel in electronic trading.