Financial Stocks Squash Market

Wall Street trends as financial stocks weigh heavily on the indices. Fannie Mae, Freddie Mac, UBS and Merrill all open to the downside.
By Sarina Penn ,

Updated from 9:39 a.m. EDT

Stocks in New York were sinking Tuesday as traders dealt with a fresh set of bad news from the financial sector, as well as another record day for oil prices.

The

Dow Jones Industrial Average

was off its low earlier this morning but still slumped 57 points to 12,912, and the

S&P 500

gave up 3 points to 1404. The

Nasdaq Composite

slipped 5 points to 2459.

Fannie Mae

(FNM)

was a drag in the early going as the mortgage buyer reported a loss of $2.51 billion, or $2.57 a share, in the latest quarter, after payment of preferred dividends. The government-sponsored firm also said it will cut its dividend and raise $6 billion through share offerings. Shares tumbled out of the gate but lately recovered to add 5.1%.

Freddie Mac

(FRE)

tacked on 2.5%, also in reversal from early losses.

Merrill Lynch

(MER)

stayed in negative territory, however, slipping 2.5% on word that the government has asked for information about auction-rate securities and the failure of some recent auctions.

Elsewhere among financials,

UBS

(UBS) - Get Report

said it took a loss of $10.97 billion in its most recent quarter after a $19 billion writedown. UBS also said it would shrink its workforce by 5,500 workers by the middle of next year, including cutting up to 2,600 employees in the investment banking division, and sell $15 billion in troubled mortgage assets to

BlackRock

(BLK) - Get Report

. Shares were off 2.5%.

Also,

Legg Mason

(LM) - Get Report

slid 5.3% after the asset manager reported a fiscal fourth-quarter shortfall of $255.5 million -- its first-ever quarterly loss -- and set plans to offer 20 million equity units in order to raise $1 billion. Underwriters will have the option to buy another $150 million worth.

On the flip side,

NYSE Euronext's

(NYX)

first-quarter pro forma income soared by 52.5% at $241 million, or 91 cents a share, thanks to record trading volume. The exchange operator also beat on both top and bottom lines.

Last time out, equity measures saw pressure from crude oil, which got past the $120 mark for the first time ever, as well as the evident disintegration of a proposed merger between

Microsoft

(MSFT) - Get Report

and

Yahoo!

(YHOO)

.

At the end of the day, the Dow lost 87 points to 12,970, and the S&P 500 surrendered 6 points to 1407. The Nasdaq sank 13 points to 2464.

As the new day began, oil touched yet another all-time high, $122, before stepping back to a $1.78 gain at $121.75. Gold futures, meanwhile, added $8.50 to $874.10. The U.S. dollar sank by 0.4% against the euro to $1.5558 while losing 0.3% to the yen at 104.42.

Back on the corporate front, Dow component

Merck

(MRK) - Get Report

announced plans to lay off 1,200 workers, a decision that comes a few days after the Food and Drug Administration rejected the company's new cholesterol drug. Shares were off 0.6% at $38.75.

Staying in the health-care sector, Israeli drugmaker

Teva

(TEVA) - Get Report

topped the first-quarter analyst consensus for both sales and adjusted income, but shares were still off 2.4%.

Homebuilder

DR Horton

(DHI) - Get Report

swung to a steep first-quarter loss that was far worse than analysts had anticipated, and the stock shed 2.6%.

But

Barrick Gold

(ABX)

came in ahead, as did

Anadarko Petroleum

(APC) - Get Report

, which crushed the average target by 22 cents a share after stripping out one-time items. Shares were up 2% and 10.6%, respectively.

Treasury prices were rising. The 10-year note was up 9/32 in price to yield 3.83%, and the 30-year bond climbed 13/32 in price, yielding 4.58%.

Overseas markets were mixed. Hong Kong's Hang Seng ticked up 0.3% overnight. In Europe, London's FTSE 100, Germany's Xetra Dax, and the Paris Cac were all losing 0.4% or more.

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