NEW YORK (MarketWatch) — U.S. stocks climbed Tuesday in a partial bounce back from the prior session’s record rout amid cautious optimism that a rescue plan rejected by the U.S. House of Representatives would be revived.

The drama continues. There are still high expectations for a successful resolution on the legislative side, but it does point to the divide of what appears to be good for Wall Street and what appears to be good for Main Street, said Jim Dunigan, managing executive of investments at PNC Wealth Management.

The Dow Jones Industrial Average gained 278.13 points to 10,643.58, with 28 of its 30 components trading higher, with blue-chip financials fronting the advance.

Citigroup Inc. gained 11.2%, J.P. Morgan Chase gained 10.2%, and Bank of America Corp. climbed 9.5%.

Of the Dow’s laggards, International Business Machines Corp. fell the most, off 1.5%, while Home Depot Inc. edging fractionally higher.

The S&P 500 climbed 34.84 points to 1,141.23, with financials leading gains that stretched across all 10 of the index’s industry groups.

Early standouts in the battered financial sector included Washington Mutual Inc. recently up 94.1%, and Sovereign Bancorp. Inc. ahead 78.9%.

The technology-laden Nasdaq Composite rose 61.74 points to 2,045.47.

Given Monday’s massive declines, it stands to reason that bargain-hunters would step in. With the washout yesterday, it wouldn’t surprise me that the market will be up for the day, said Dunigan.

Volume on the New York Stock Exchange topped 285 million, with advancing stocks passing declining issues 2 to 1. On the Nasdaq, 192 million shares traded, with advancers bypassing decliners 7 to 6.

U.S. stocks plunged Monday — the single-worst point drop ever for the Dow Jones Industrial Average — after the House voted down the Troubled Assets Relief Package.

Overnight LIBOR, the rate banks charge to each other, jumped to 6.875% from 2.56875%.

Bush appeal

In a statement ahead of Wall Street’s start, President Bush expressed disappointment at the failure of House members to pass the rescue package on Monday, calling the situation a very critical moment for the economy. .

In economic data, the Case-Shiller home price index released by Standard & Poor’s found home prices in 20 major U.S. cities falling at a faster pace in July, bringing home values down a record 16.3% in the past year.

And, a gauge of business activity in the Chicago region reported an expansion at a healthy pace in September.

Separately, the Conference Board reported U.S. consumer confidence climbed in September for a third consecutive month, but the level remained relatively low.

Yields on 10-year Treasury notes rose 7 basis points as investors sold bonds.

Gold futures fell to about $882 an ounce, while crude-oil futures gained to stand above $98 a barrel.

Overseas markets also were performing relatively well after Monday’s bruising. The Nikkei 225 tumbled 4.1% in Tokyo, but the Hang Seng closed higher.

European shares posted modest gains, and appeared likely to end the third quarter down about 13%, with most of the losses generated in September.