Stocks in U.S. Tumble as Financials Suffer Again

Following a report that it would lay off employees in September as it tries to reduce costs, Wachovia (WB Quote) shares were among the few bank stocks to rise in early trading, but a great deal of those gains were given back. The stock was recently up 1.9%.

The regional banks were adding pressure to the market Monday as the government seizure of IndyMac and a Fed and Treasury-sponsored plan to bolster Fannie and Freddie reminded investors that the subprime mess and credit crunch have yet to fully unwind.

Federal Deposit Insurance Corporation chair Sheila Blair said on CBS' "The Early Show" today that deposits in U.S. banks are "absolutely safe."

In another blow to confidence in the banks, Oppenheimer analyst Meredith Whitney downgraded Wachovia (WB Quote) to underperform from perform, citing a high probability of declining assets and worsening losses for the troubled company.

Similarly battered brokerage Lehman Brothers (LEH Quote) is trying to find a way to go private, said a New York Post report that cited unnamed sources. A Fox-Pitt Kelton analyst said yesterday that, because investors are pricing in a Bear Stearns-like scenario for Lehman, it would be better off making such a move.

Meanwhile, consumer conglomerate Johnson & Johnson (JNJ Quote) and industrial equipment maker Eaton (ETN Quote) both delivered financial results that beat analysts' expectations. Johnson & Johnson raised guidance for 2008, while Eaton was less optimistic going forward.

Away from earnings, General Motors (GM Quote) announced it would be cutting jobs, closing factories faster and suspending its dividend to cut costs at it copes with an increasingly difficult auto market.