Stocks in U.S. Tumble as Financials Suffer Again

Updated from 9:43 a.m. EDT

The major New York indices were down in the dumps Tuesday morning as traders fussed over discouraging quarterly results from the regional banks, so-so economic data and Federal Reserve Chairman Ben Bernanke's Senate appearance.

The Dow Jones Industrial Average was recently off 162 points to 10,893, and the S&P 500 was down 20 points at 1208. The Nasdaq gave up 28 points at 2185.

Bernanke testified before the Senate Banking committee about the Fed's decision to grant ailing mortgage packagers Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) access to its discount window to raise capital. He also said that as weakness in the dollar contributes to rising oil prices, inflation remains a risk to the U.S. economic outlook.

At the same time, President George W. Bush spoke at the White House, calling on Congress to provide aid to Fannie and Freddie. He also reiterated his request that Congress lift a ban on offshore oil drilling.

Fannie and Freddie faced an additional blow this morning when ratings agency Moody's cut Freddie's financial strength and preferred stock ratings and put the preferred stock rating on watch for a further downgrade. Shares of Fannie were down 17%, and Freddie dropped 25% in midmorning trading.

Earnings statements from the financial sector offered little solace for fretting investors. Regional bank State Street (STT Quote) posted second-quarter earnings of $1.35 a share, up from $1.07 a year ago. State Street also raised its EPS forecast for 2008.

First Horizon (FHN Quote) swung to a loss of 11 cents a share from a 20-cent profit a year ago, falling short of the Street's forecast of an 8-cent per-share loss. Sector buddy USBancorp's (USB Quote) earnings per share fell 12 cents year over year to 53 cents and fell short of the Thomson Reuters consensus of 59 cents a share.