Stocks rebounded on Tuesday after the Federal Reserve held the line on key interest rates and sale of Lehman Brothers came to light.

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Two days after walking away from a deal to purchase all of Lehman Brothers, Barclays PLC said Tuesday it had agreed to acquire Lehman's North American investment banking and capital markets businesses for $250 million in cash.

Stocks also were higher on hopes that American International Group would not fail as the Fed was considering a loan package for the troubled insurer. The Fed Reserve later announced it was providing an $85 billion emergency loan to rescue the huge insurer AIG.

The Fed said in return for the loan, the government will receive a 79.9 percent equity stake in AIG.

The Dow Jones industrial average gained 141 points and finished at the 11,059. On Monday, the Dow tumbled 504 points, its largest drop since the September 2001 terror attacks.

The S&P 500 rose nearly 21 points to 1,213. And the Nasdaq composite added 28 points to 2,207.

Declining stocks held a 9-to-7 lead.

Volume came to more than 9 billion shares on the New York Stock Exchange. Nasdaq market volume was 3.1 billion shares.

After what one Asian market-watcher called "a bloodbath," Japan's Nikkei 225 average rose 1.6 percent by midday after sinking nearly 5 percent the day before. South Korea's Kospi climbed 2.7 percent and Taiwan's benchmark rose 1 percent.

But Hong Kong's blue-chip Hang Seng Index, however, sank another 1.4 percent -- dropping a total of 6.8 percent for the week.

Crude oil's remarkable decline continued. Near-month crude fell $4.56 to settle at $91.15 a barrel.

Fed Leaves Key Interest Rate Unchanged

The Federal Reserve said strains in financial markets have "increased significantly," but it kept a key interest rate unchanged Tuesday.

The central bank said Tuesday it was keeping its target for the federal funds rate, the interest that banks charge on overnight loans, unchanged at 2 percent.

In a statement, the Fed said "strains in financial markets have increased significantly and labor markets have weakened further."

It continued by saying, "Economic growth appears to have slowed recently, partly reflecting a softening of household spending."

Analysts had said the chances of a rate cut were growing, whether it came Tuesday or later this year.

Meanwhile, in an urgent effort to keep cash flowing amid a Wall Street meltdown, the Federal Reserve pumped $50 billion into the nation's financial system Tuesday in an attempt to stem credit stress.

The Federal Reserve Bank of New York's action came in addition to its regular market operations to inject $20 billion into the system slated for the day.

Congress Weighs New Regulations

A Congress criticized for being asleep at the switch as financial problems festered on Wall Street is now eyeing tough new regulations for investment banks. It's also exploring a new government role in the mortgage market.

Lawmakers may impose much stiffer regulations to put a stop to the array of financial products and practices that have some of Wall Street's institutions on the brink of failure.

They're also weighing what to do with mortgage giants Fannie Mae and Freddie Mac. Options include taking them private, morphing them into a public utility or federal agency, or leaving them as government-sponsored entities with private shareholders and profits, but tougher regulations.

But with just seven weeks until Election Day and lawmakers focused on campaigning, there's no chance anything will happen this year.