New York - After Monday's record-breaking plunge, US stocks rallied at opening on Tuesday, recovering up to a a third of losses on revived hopes for a rescue plan for the financial system, with bargain-hunting investors helping the rise.

The Standard & Poor's 500 Index recovered almost a third of Monday's 8.79 per cent drop, Bloomberg financial news service reported. The drop was the largest in two decades.

Indices dropped dramatically on Monday after the US House of Representatives rebuffed the 700-billion-dollar bail-out package intended to thaw out credit lines frozen by bad mortgage assets and securities.

By Tuesday morning, large financial firms JPMorgan Chase & Co, Citigroup Inc and Goldman Sachs Group Inc advanced more than 5 per cent as Democrat and Republican congressional leaders said a bailout deal would eventually pass.

"The market appears hopeful something will happen," John Carey, a Boston-based money manager at Pioneer Investment Management, was quoted as saying by Bloomberg. "There's the thought Congress will come back to this bailout proposal. That's the expectation. The market debacle yesterday seems to have gotten people's attention in Washington."

The broad-based S&P 500 rose 34.74 points, or 3.14 per cent, to 1,141.13 at 1535 GMT. The Dow Jones Industrial Average of blue chips gained 261.40, or 2.52 per cent, to 10,626.85 after falling a record 777.68 points, or 6.98 per cent, on Monday. The Nasdaq Composite Index added 63.12, or 3.18 per cent to 2,046.85, after shedding 9.14 per cent on Monday.

European and Asian shares put in a mixed performance Tuesday but showed greater resilience than many market watchers had expected. After predictable early trading losses in Asia, shares began to turn around again with some exchanges posting slim gains, while in Europe the fluctuations on the market were moderate.