Bad news on the earnings and regulatory front has driven down the price of J.P. Morgan Chase's ( JPM - Get Report) stock all year, making it one of the worst-performing bank stocks in the sector.

But it was a week-old, unsubstantiated rumor that Chicago-based Bank One ( ONE - Get Report) is eyeing J.P. Morgan that helped push J.P. Morgan's stock back to the $20 mark for the first time in a month.

Shares of the nation's second-largest bank rose $1.03, or 5.4%, to $20 a share, today making J.P. Morgan one of the top-performing bank stocks on an overall strong showing for the financial sector. The Philadelphia Bank KBW Bank Index rose 1.52%.

The company wouldn't comment on the rumor.

Even with Monday's gain, shares of J.P. Morgan are down 42% for the year and the stock is still trading near its lowest level since the two-year-old merger of J.P. Morgan and Chase Manhattan Bank.

Most banking experts, however, discounted the Bank One buyout rumor, which seemed to gain currency when a financial Web site mentioned it at around 10:30 a.m EDT.

Harold Schroeder, a portfolio manager with Carlson Capital, a hedge fund that specializes in buying and shorting financial stocks, said he gives "no credence" to the rumor. He said J.P. Morgan has a lot of problems that need fixing and a buyout won't necessarily make them go away.

Morgan's Big Mo
Ailing financial firm gets a rumor-induced boost

A J. P. Morgan spokesman couldn't be reached for comment. A Bank One spokeswoman said the bank doesn't comment on rumors.

Last week, J.P. Morgan reported dismal third-quarter earnings. Net income at the bank dropped 91% from a year ago and J.P. Morgan's once vaunted investment banking division posted a quarterly loss.

For much of the year, J.P. Morgan has been plagued with a rising tide of bad loans to telecommunication and energy companies, weak trading revenues on its equities desk, and concerns about some of its business practices. In recent months, there have been rumblings on Wall Street about the need for a top-level management shakeup at the bank, including calls for the ouster of Chairman and Chief Executive William Harrison.

David Stumpf, a bank analyst with A.G. Edwards, says buyout rumors are bound to surface in the market when a stock has been as beaten up as J.P. Morgan and its "management team is under tremendous pressure." (Stumpf has a hold rating on the bank's shares. A.G. Edwards has done investment banking work for J. P. Morgan in the past year).

But Stumpf, like other industry experts, said he saw little substance behind the rumor. He noted that in this uncertain economic environment it would be difficult for any bank to pull off a deal for J.P. Morgan.

Bank One, the nation's sixth-largest bank in terms of assets, has a market capitalization of $46 billion. Close behind is J.P. Morgan with a market cap of about $41 billion.

Typically, when a company uses stock to acquire a similarly sized company, it has a dilutive impact on the acquiring company's shares, something that could anger its own shareholders.

One thing that's intriguing about the rumor, however, is the possibility of Bank One Chairman Jamie Dimon stepping in to take over the reins at J.P. Morgan. Dimon had been a fast-rising star at Citigroup ( C) and a one-time prot¿g¿ of Citigroup Chairman Sanford Weill, before being forced out of Citi in a power struggle.

Still, some say an easier way for Dimon to take over J.P. Morgan would be to simply make a play for Harrison's job.