Stocks Find No Solace in Fed

Barclays denied the report, but its shares lost $2.33, or 4.8%, at $46.61.

Elsewhere, Citigroup (C Quote), Lehman Brothers (LEH Quote) and Bear Stearns (BSC Quote) were all downgraded to neutral from buy by Merrill Lynch. All were lower by 3.5% or more.

Jitters over the economic reports and the Fed outweighed M&A news. Medco Health (MHS Quote) said it will acquire PolyMedica (PLMD Quote) for $1.5 billion, a 17% premium to the stock's last closing price. Medco shed 1.2% to $85.11, while PolyMedica jumped 14.1% to close at $51.69.

Wendy's (WEN Quote) traded higher after word that Triarc (TRY Quote), which owns the Arby's restaurant name, and Nelson Peltz's Trian Fund may purchase the restaurant chain. Wendy's gained 70 cents, or 2.2%, to $32.69.

Home Depot (HD Quote) confirmed that it will take less than it had planned for its supply unit, saying it will sell 87.5% of the division to private equity investors for $8.5 billion. Home Depot will retain a 12.5% stake. Previously, the sale was priced above $10 billion. Shares added 3 cents, or 0.1%, to close at $35.05.

Away from stocks, the front-month October crude contract ended lower by 19 cents to $71.74 a barrel. Gasoline prices were lower by 2 cents at $2.02 a gallon.

Treasury bonds went higher. The 10-year note rose 11/32 in price, yielding 4.53%. The 30-year bond was up 1/32 in price to yield 4.85%.

Asia's markets finished lower overnight. Hong Kong's Hang Seng eased nearly 1%, and Japan's Nikkei 225 dipped 0.1%. In Europe, London's FTSE 100 was off 1.9%, and Germany's Xetra Dax was down 0.7%.