Stocks Off to a Shaky Start

Updated from 9:07 a.m. EDT

Stocks on Wall Street followed Monday's strong rally with an open to the downside Tuesday as traders digested the government's takeover of mortgage giants Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote).

The Dow Jones Industrial Average lost 26 points to 11,484, and the S&P 500 fell 5.6 points to 1262. The Nasdaq dropped 4 points to 2266.

On Monday, the major indices finished with solid gains following the government takeover of Fannie and Freddie. The two companies have been at the epicenter of the housing and credit crises, and questions about their solvency had contributed to worries about the entire financial-services industry.

After that day's close, a regulatory filing showed Michael Dell, CEO of PC maker Dell (DELL Quote), bought $100 million in the company's stock last week.

Ahead of the new day's trading, Dow Jones Newswires reported that South Korea Development bank, which had earlier been rumored ready to buy a stake in Lehman Brothers (LEH Quote), has ended talks with the struggling brokerage.

Meanwhile, mining company Sasol (SSL Quote) reported full-year profit rose 32% from a year ago. The company also said it expects continued growth in the year ahead.

Marius Kloppers, CEO of fellow miner BHP Billiton (BHP Quote), said that slowing global demand for commodities will bring shareholders of Rio Tinto (RTP Quote) to support BHP's hostile bid for the company.

Several stocks could be ready to move following analyst actions. Stifel Nicolaus downgraded banking companies TCF Financial (TCB Quote) and BB&T (BBT Quote) to hold from buy and to sell from hold, respectively. Wachovia (WB Quote) also took a hit from Merrill Lynch, which cut the bank to underperform from neutral.