US stocks decline

Wall Street extended its slump into yet another week today as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac would not head off further troubles in the US financial markets.

Investors’ latest unease about the banking sector comes in a week when many financial names are to issue quarterly reports – many of which will likely include sizeable write-downs of souring mortgage debt.

The Treasury and the Federal Reserve said yesterday they would aid Fannie Mae and Freddie Mac if needed.

Wall Street has been on edge about the wellbeing of the government-chartered companies because together they hold or back 5.3 trillion of mortgage debt, about half the outstanding mortgages in the US.

Washington’s efforts to shore up confidence in Fannie Mae and Freddie Mac at times helped those shares today but troubles arose in other corners of the financial sector.

Investors worried about a run on IndyMac Bancorp. that led to the bank’s takeover by the government on Friday. IndyMac is the largest regulated thrift institute to fail.

Trading in shares of regional bank National City was briefly halted as the company responded to rumours of financial troubles. The bank said in a statement it was experiencing “no unusual depositor or creditor activity” and that as of Friday’s close it had more than 12 billion of excess short-term liquidity.

The rumours and sell-off of regional banks reflect the unease investors have about where financial troubles might emerge.

“My sense is that investors are taking a pretty cautious stance,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “The government can’t bail out the whole industry.”

The Dow Jones industrial average fell 45.35, or 0.41%, to 11,055.19 after spiking nearly 140 points in early trading.

Worries over Fannie Mae and Freddie Mac on Friday led to a volatile session in which the Dow dipped below the 11,000 mark for the first time in about two years before paring its losses; the market suffered its fourth straight losing week.

Broader stock indicators also dropped today. The Standard & Poor’s 500 index fell 11.19, or 0.90%, to 1,228.30, and the Nasdaq composite index fell 26.21, or 1.17%, to 2,212.87.