Stocks Stuck in a Rut

Updated from 12:12 p.m. EST

Stocks on Wall Street were in a slump Tuesday, as financial firms were working to accommodate strains on homeowners, U.S. automakers fumbled for answers to a stark business outlook and corporate earnings statements remained lackluster.

The Dow Jones Industrial Average lost 286 points to 8585, and the S&P 500 fell 32 points to 887. The Nasdaq gave back 50 points to 1567.

Among stocks in the news, Citigroup (C Quote) said it would alter terms for mortgages to avoid foreclosure proceedings on as much as $20 billion in at-risk home loans.

Bank of America (BAC Quote) and JPMorgan Chase (JPM Quote) had previously announced similar refinancing plans.

Bloomberg also reported that government-controlled mortgage companies Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) were also planning mortgage-restructuring initiatives. The Federal Housing Finance Agency, which controls Fannie and Freddie, has scheduled a press conference at 2 p.m. to discuss the plan.

The decision by big banks to refinance mortgages is about a year overdue, said Michael Church, portfolio manager at Church Capital. Although it's much cheaper for banks when they avoid foreclosing on homes, securitization of mortgages has made it difficult to find out who the end-borrowers and the end-lenders are. "With things on a massive scale like this, I'm not surprised it has taken a year," he said.

Meanwhile, credit card company American Express (AXP Quote) got the go-ahead from the Federal Reserve to turn itself into a bank holding company. Such a move would allow American Express to build a deposit base and secure Fed funding.

Goldman Sachs (GS Quote) and Morgan Stanley (MS Quote) had earlier this year successfully petitioned the Fed for bank holding company status.