* Bank of America to take mortgage settlement charge
* China data eases fears of more monetary tightening
* Futures up: Dow 80 pts, S&P 9.7 pts, Nasdaq 23.5 pts (Adds quote Alcoa, updates prices)
NEW YORK, Jan 3 (Reuters) - U.S. stocks were set for a higher open on Monday as returning investors bet a 2010 rally would continue in the new year and Chinese factory inflation data tempered concerns over increased monetary tightening.
Investors awaited the Institute of Supply Management's manufacturing survey, due at 10 a.m. EST (1500 GMT), for fresh evidence on the health of the economy. Economists polled by Reuters forecast the ISM's high-profile measure of U.S. factory activity edging higher to 57 from 56.6.
The official Chinese purchasing managers' index edged down in December and fell short of forecasts, easing concerns that rising inflation would lead the government to take more steps to control growth.
"The bigger fear is that they were going to overdo it on the tightening side, that they were going to slow the economy too much," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
"If you get a little bit of a slowdown, a little bit of a disappointment and it conjures up the idea they are not going to start raising rates at the end, you would rather have a little bit of a slowdown than an overaggressive action."
Pado also pointed to a "January effect" boosting U.S. stocks as fund managers are no longer engaged in window dressing and focus on stocks they find attractive versus names that have done well for the year.
S&P 500 futures gained 9.7 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures jumped 80 points, and Nasdaq 100 futures rose 23.5 points.
U.S. stocks ended the year with double-digit gains, with the S&P 500 recording its best December since 1991. The gains marked a recovery to levels before the collapse of Lehman Brothers in September 2008. For the year, the S&P rose 12.8 percent, the Dow Jones industrial average climbed 11 percent, and the Nasdaq surged 16.9 percent.
From its July low the S&P has risen 23 percent, boosted by improving economic data, positive earnings reports and stimulus measures by the U.S. Federal Reserve. Investors returning from the holidays will closely watch a host of economic data this week for signs of improvement in the economy to justify the gains.
Other data expected at 10 a.m. (1500 GMT) includes construction spending for November, seen showing an increase of 0.2 percent, according to forecasts.
Bank of America Corp will put aside $3 billion in the fourth quarter related to poorly underwritten mortgages it sold to Fannie Mae and Freddie Mac after the bank agreed to settle claims over the repurchase of those loans. Bank of America shares were up 3.9 percent to $13.86 in premarket trading.
Alcoa Inc gained 3.1 percent to $15.87 premarket after Deutsche Bank upgraded the stock to "buy" from "hold," citing "growing optimism on both aluminum's likelihood of higher prices and a belief that Alcoa has turned the corner from an operational point of view."