Stocks Dig Deeper Into the Red

Updated from 10:50 a.m. EDT

Stocks in New York opened Monday on a downbeat and continued falling deeper into negative territory after the release of existing-home sales data and uncertainty about the fate of several struggling financial-services companies left investors in a selling mood.

The Dow Jones Industrial Average gave back 212 points to 11,416, and the S&P 500 slipped 22 points at 1270. The Nasdaq skidded 47 points to 2367.

On Friday, the markets closed with substantial daily gains following a report that troubled brokerage Lehman Brothers (LEH Quote) may have found a buyer in Korea Development Bank. Traders were also encouraged by statements from Federal Reserve Chairman Ben Bernanke that suggested the central bank would not be raising interest rates before the end of the year.

Before the new week's trading got underway, Korean financial regulators let some air out of the Lehman news, saying that Korea Development Bank should be careful when making such a risky purchase. Shares of Lehman were down 7.5%.

Mortgage firm Freddie Mac (FRE Quote), another focal point of the credit crunch, saw shares rise 10% early on Monday after the firm successfully sold $2 billion worth of three-month and six-month bonds. During the previous week, a less successful bond sale had investors worrying about the company's ability to raise capital.

Hugh Johnson, chief investment officer at Johnson Illington Advisors, says that Fannie Mae (FNM Quote), Freddie Mac and Lehman Brothers remain among the chief concerns of investors and portfolio managers. He said he foresees a government bailout of Fannie and Freddie. "The question is when."