YAHOO[BRIEFING.COM]: Monday's session began on a promising note as stocks opened with solid gains following word the government may help Citigroup increase its tangible equity, while several government agencies pledged their support for the banking system as Treasury prepares to begin a series of stress tests for banks. The upward move was short-lived, though, as participants refocused on the lack of concrete solutions for the broader banking system.

In the early going, stocks were up 1%. Participants reacted positively to word the government may convert its preferred Citigroup (C 2.14, +0.19) shares into common shares. Though the government could hold as much as a 40% stake in the company, which would drastically dilute existing shareholders, such a move would bolster Citi's tangible equity and improve the bank's ability to absorb losses.

The announcement comes as Treasury's Capital Assistance Program is set to begin Wednesday. The plan aims to assess the health of banks.

Separately, government agencies pledged their support for a strong financial system in a joint statement. The government will provide temporary capital if it is unavailable from private sources. The announcement suggests the government will provide the banking system the capital it needs to survive, while helping to keep credit flowing so that economic conditions can recover.

Financial stocks reacted positively to the announcements, climbing to a gain of 4.6%, but finished with a 3.0% loss as investors recognized the plans may help bank capital ratios, but they won't solve their troubles.

To that point, CNBC reported AIG (AIG 0.53, -0.01) is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in corporate history. Sources say the losses will be near, if not exceeding, $60 billion.

The broader market declined steadily throughout the session, closing down 3.5% at session lows. That handed the Dow its lowest intraday and closing levels since October 1997, taking out the lows set in the prior session. The S&P 500 settled just two points above its November lows. The Nasdaq remains 7% above its November lows.

Despite the broad losses, automakers gained as Ford (F 1.73, +0.15) reached a tentative agreement with the UAW regarding funding for benefits. Ford is expected to be able to use a mix of cash and stock. Meanwhile, The Wall Street Journal stated Treasury consultants are lining up funds in the event they are needed to finance bankruptcy at General Motors (GM 1.77, +0.00) or Chrysler.

There were neither market moving earnings announcements nor economic data this session. Tomorrow is also light on earnings and economic data, but Fed Chairman Bernanke will provide his semiannual monetary policy report to the Senate Banking Committee. He follows with a semiannual monetary policy report to the House Financial Services Committee Wednesday. DJ30 -250.89 NASDAQ -53.51 SP500 -26.72 NASDAQ Adv/Vol/Dec 547/2.05 bln/2158 NYSE Adv/Vol/Dec 417/1.61 bln/2694