Ahead of the Bell: Lawmakers work on new bailout

Stocks headed for a partial rebound--after logging their steepest declines in years on Monday following the proposal's failure--as some investors are expected to hunt for bargains. But without a bailout plan in place, questions remain about how ailing banks are going to handle mounting losses tied to bad mortgage debt, and concerns over the stability of the financial sector lingered.

Though the House is not scheduled to meet again until Thursday, congressional leaders and Bush administration officials were assessing the types of revisions needed to get the bill passed.

The bailout was expected to be a welcome boost to banks like National City Corp. and Sovereign Bancorp Inc., which have seen their stock prices plummet in recent months.

National City shares gained 44 cents, or 32 percent, to $1.80 in premarket trading, while Sovereign jumped 97 cents, or 42 percent, to $3.30.

On Monday, Citigroup Inc. agreed to buy the banking operations of troubled Wachovia Corp. for $2.1 billion in a deal orchestrated by federal regulators. The deal secured Citigroup's place among the top three banks in the country, alongside Bank of America Corp. and JPMorgan Chase & Co.

Also Monday, Japan's Mitsubishi UFJ Financial Group announced plans to buy $9 billion of Morgan Stanley common and preferred stock. Morgan Stanley and Goldman Sachs Group Inc. had been the two remaining independent Wall Street investment banks until they recently applied to become commercial banks that take deposits.

In premarket activity, Citigroup shares added 85 cents, or 4.8 percent, to $18.60. Wachovia shares rose 35 cents, or 19 percent, to $2.19.

Bank of America rose $1.20, or 4 percent, to $31.45. JPMorgan advanced $2.50, or 6.1 percent, to $43.50.

Morgan Stanley shares advanced $1.52, or 7.2 percent, to $22.51. Goldman Sachs gained $5.29, or 4.4 percent, to $125.99.