By Leah Schnurr

Wall Street stocks finished well off earlier lows with the Nasdaq outpacing the other key indexes as investors bet technology companies in particular will benefit from a proposed infrastructure plan.

In response to indications that the recession is deepening, Democratic leaders in the U.S. House of Representatives unveiled an $825 billion tax cut and spending bill. After the closing bell, the U.S. Senate rejected an attempt to block the release of the remaining $350 billion from the financial bailout fund.

Shares of Bank of America and Citigroup plummeted on fears the embattled banks may need more government help to deal with soaring credit losses. Bank of America shed more than 18 percent, while Citigroup lost over 15 percent.

"All the bad news on banks is putting pressure on Washington to get a stimulus package passed soon and that may be lifting optimism some," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.

The Dow Jones industrial average <.DJI> added 12.35 points, or 0.15 percent, to 8,212.49. The Standard & Poor's 500 Index <.SPX> rose 1.12 points, or 0.13 percent, to 843.74. The Nasdaq Composite Index <.IXIC> was up 22.20 points, or 1.49 percent, at 1,511.84.

The afternoon's advance helped the Dow snap a six-day losing streak. But recent declines have left the broad S&P 500 up nearly 14 percent from the 11-year lows hit in late November, after starting the year up 20 percent off those lows.

Futures rose following the Senate vote, which assures the U.S. Treasury will have access to the rest of the bailout funds.

Analysts said hopes that the government is willing to pull out all the stops to shore up the embattled financial sector and the larger economy helped stocks reverse earlier losses during the session.

Results from Intel Corp , the world's biggest chip maker, that were in line with already lowered analyst estimates following a revenue warning last week also helped futures edge upward.

Intel's shares rose 2.1 percent at $13.57 in extended trade.

Investors fretted about the fate of Citigroup a day before the embattled bank is due to announce more losses and lay out a plan about its strategic direction. Citigroup ended down 15.5 percent at $3.83 while the S&P financial index <.GSPF> tumbled 5.1 percent.

Bank of America gave up 18.4 percent at $8.32, making it the Dow's biggest drag. The bank is in talks with the U.S. government to receive about $15 billion in additional capital from the Treasury's Troubled Asset Relief Program, according to a source.

A steep drop in the price of oil helped consumer-oriented sectors, including retailers and airlines, as investors hoped lower energy costs will take some pressure off cash-strapped consumers. The S&P retail index <.RLX> was up 3.9 percent, while the airline index <.XAL> rose 4.6 percent.

Oil settled down $1.88 at $35.40 barrel as heightened economic gloom exacerbated worries that world energy demand will keep shrinking.

Standout beneficiaries included home improvement retailer Home Depot , which rose 4.1 percent to $22.81 to lead the Dow's advance, offsetting the drag from Bank of America.

Trading was active on the New York Stock Exchange, with about 1.65 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.50 billion shares traded, above last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by 1,670 to 1,420 while advancers beat decliners on the Nasdaq by about 1,556 to 1,151.

(Reporting by Leah Schnurr; editing by Gary Crosse)