NEW YORK — Shares of investment banks jumped in early trading on Tuesday, after the Federal Reserve revealed plans to inject $200 billion in cash into a troubled economy that has been rocked by turmoil in the subprime mortgage and credit markets.

By pumping liquidity into the market, the Fed's new lending initiative provides a confidence boost to banks and other financial institutions that have been reluctant to lend to one another.

Under the terms of the program, the Term Securities Lending Facility will give short-term loans to primary dealers, or big investment firms that trade directly with the Fed. In return, they will pledge other securities, including federal agency debt, federal agency residential-mortgage-backed securities, as collateral.

Shares of Bear Stearns Cos. gained $3.16, or 5.2 percent, to $65.47 in morning trading. On Monday, the stock hit a new 52-week low on speculation that the company was having funding problems. Bear Stearns denied the rumors, saying its balance sheet, liquidity and capital remain strong.

The Amex Securities Broker/Dealer index, which is comprised of 12 investment banks, is down about 22 percent since the start of the year. The index surged 4 percent in morning trading Tuesday.

Goldman Sachs Group Inc. rose $7, or 4.5 percent, to $162.59

Lehman Brothers Holdings Inc. advanced $2.95, or 6.9 percent, to $45.99

Morgan Stanley gained $2.47, or 6.5 percent, to $40.84

Merrill Lynch & Co. jumped $1.50, or 3.7 percent, to $44.45

Citigroup Inc. rose $1, or 5.1 percent, to $20.69