JPMorgan Chase yesterday increased its offer for the investment banking giant Bear Stearns by about $2 billion, putting down a shareholder revolt and all but guaranteeing that the wounded Wall Street firm would be sold before its troubles spread to the rest of the financial system.

The deal had been threatened by Bear Stearns shareholders, who saw their fortunes nearly wiped out last week when the firm agreed to be acquired for a paltry $2 per share in a deal engineered by the Federal Reserve. The hastily arranged transaction was designed to prevent a bankruptcy that could have led to a string of other investment bank collapses.

Wall Street surged yesterday after investors learned that JPMorgan had boosted its offer to $10 a share. The Dow Jones industrial average jumped 1.5 percent yesterday, and Bear Stearns stock zoomed ahead 89 percent.

A report showing an unexpected increase in home sales added to the cheer on Wall Street.

As part of the new Bear Stearns deal, the Fed's role was also renegotiated. The central bank originally had agreed to put public dollars on the line to guarantee $30 billion of risky mortgages owned by Bear Stearns. In the reworked deal, JPMorgan agreed to cover the first $1 billion in losses if the value of those securities falls, with the Fed responsible for any losses beyond that.

The New York Fed, which played a leading role in the negotiations, also provided more detail yesterday about how this multibillion-dollar government guarantee will work. The Fed will place the securities in a newly created limited liability corporation and hire BlackRock Financial Management to sell the securities gradually to minimize the market disruption.

JPMorgan was able to buy a 39.5 percent stake in Bear Stearns as a result of the new negotiations. Together with previously owned shares and pledges of support from Bear Stearns' board of directors, JPMorgan now has a lock on the majority it needs to win shareholder approval for the deal, according to a banker involved in the negotiations. The deal is slated to close April 8, he said.