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US STOCKS-Stimulus hopes lift futures, S&P 500 set for second straight weekly gain

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* Futures up: Dow 0.31%, S&P 0.31%, Nasdaq 0.15%

Oct 9 (Reuters) - U.S. stock index futures rose on Friday, setting the S&P 500 up for its second weekly gain in a row as hopes for more fiscal aid boosted optimism against the backdrop of political uncertainty ahead of the presidential election.

After stalling talks with Democrats on a comprehensive aid package earlier this week, U.S. President Donald Trump on Thursday called for a “skinny” relief bill that would include elements such as direct payments and a bailout to the struggling airline sector.

Recent trading on Wall Street - particularly in shares of U.S. airlines, which began mass furloughs after a previous payroll support package expired - has been dictated by negotiations between the White House and Democrats on more fiscal aid.

After sinking 3% on Tuesday as Trump broke off aid talks, the S&P airlines subindex has jumped in the past two sessions and is on track for one of its best months this year.

Strategists say investors have also begun to price in the possibility of Democratic presidential nominee Joe Biden winning the Nov. 3 election, with a recent Reuters/Ipsos poll showing Americans were steadily losing confidence in Trump’s handling of the COVID-19 pandemic.

Gains in U.S. stocks this week have been concentrated in small- and mid-cap firms, which stand to benefit more from a Biden victory than the large-cap companies that had so far fueled Wall Street’s recovery from the coronavirus lows hit in March, fund managers said.

Attention from next week will also be on Corporate America’s third-quarter earnings season, kicked off by JPMorgan Chase & Co , Citigroup Inc and drugmaker Johnson and Johnson .

Analysts expect earnings at S&P 500 firms to have dropped about 21% in the quarter, according to IBES data from Refinitiv.

At 6:53 a.m. ET, Dow e-minis were up 89 points, or 0.31%, S&P 500 e-minis were up 10.5 points, or 0.31%, and Nasdaq 100 e-minis were up 17 points, or 0.15%.

In company news, Xilinx Inc surged 17.0% after a report said Advanced Micro Devices Inc was in talks to buy the chipmaker in a deal that could be valued at more than $30 billion. Shares of AMD fell 5.8%. (Reporting by Devik Jain and Sagarika Jaisinghani in Bengaluru; Editing by Maju Samuel)