NEW YORK - Wall Street snapped back Tuesday after its biggest sell-off in years amid growing expectations that lawmakers will salvage a $700 billion rescue plan for the financial sector. But the seized-up credit markets where businesses raise money showed no sign of relief.

The recovery in stocks wasn't unexpected: Carnage on Wall Street often attracts bargain hunters. Without a bailout plan in place to absorb soured mortgage debt and other bad loans from battered banks, investors are left wondering what might restore confidence in lending.

Major stock indexes were almost a sideshow during the session, with the credit markets as the main event. A key rate that banks charge when lending to one another shot higher, a tightening of the availability of credit that could cascade through the economy.

Traders on the New York Stock Exchange floor, still stunned from Monday's 778-point rout in the Dow Jones industrial average, warned that the government needs to approve a plan that will sweep away the fears that hobbled the credit markets. While political leaders have vowed to revisit the issue, the House isn't slated to meet again until Thursday.

"If it doesn't pass, then look out below," said NYSE trader Jason Weisberg of Seaport Securities. "It could get ugly."

Though the blue-chip index had risen nearly 500 points by late afternoon, the main worry for traders was that the lack of a plan would make it nearly impossible for some companies to make payroll and fund basic operations. Participants in the credit market buy and sell debt that companies use to finance operations.

The benchmark London Interbank Offered Rate, or LIBOR, that banks charge to lend to one another rose sharply Tuesday, making it more expensive and difficult for consumers and businesses to borrow money. In addition, credit card debt and more than half of adjustable rate mortgages are tied to LIBOR, so many consumers don't want it to increase.

LIBOR for three-month dollar loans rose to 4.05 percent from 3.88 percent Monday.

The Dow rose 485.21, or 4.68 percent, to 10,850.66 after falling nearly 7 percent Monday to its lowest close in nearly three years. Broader stock indicators also rose. The Standard & Poor's 500 index recovered 58.35, or 5.27 percent, to 1,164.74, and the Nasdaq composite index rose 98.60, or 4.97 percent, to 2,082.33.

Light, sweet crude rose $4.27 to settle at $100.64 in New York.

Overseas, Japan's Nikkei stock average fell 4.12 percent. Hong Kong's Hang Seng index rose 0.76. Britain's FTSE 100 rose 1.74 percent, Germany's DAX index added 0.41 percent, and France's CAC-40 rose 1.99 percent.

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