Stocks Close Session With Steep Losses - TheStreet

Updated from 4:15 p.m. EDT

Stocks on Wall Street rolled downhill to close with deep losses Monday as reminders of the ongoing housing and credit crises mixed with earnings from several big Wall Street names.

The

Dow Jones Industrial Average

lost 239.61 points, or 2.1%, to 11,131.08, and the

S&P 500

gave up 23.39 points, or 1.9%, to 1234.37. The

Nasdaq

slipped 46.31 points, or 2%, to 2264.22.

Over the weekend, a slew of corporate news emerged to help set the tone for Monday's trading. In a new development for the ongoing credit crisis, the government said last Friday that it had

closed two banks

, First National Bank of Nevada and First Heritage Bank of Newport Beach California. The Federal Deposit Insurance Corporation is backing the banks' deposits.

Meanwhile, Congress on Saturday

passed a housing bill

that would help homeowners refinance their mortgages and prop up battered government-sponsored entities

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

. Fannie slipped 11% to $10.31, and Freddie dropped 6.7% to $7.72.

Speaking Monday afternoon in Washington, D.C., Treasury Secretary Henry Paulson introduced a plan to help develop covered bonds -- a potentially less-risky instrument for securitizing mortgages and other assets -- in the U.S. Paulson said that though covered bonds alone won't fix the housing market, they will boost mortgage financing.

The crisis in the housing market is creating concerns about the overall economy, said Bob Andres, chief investment strategist at Portfolio Management Consultants.

"I think what you're seeing is a continuation of uncertainty," said Andres, saying last week's rally in equities was short-covering. "I don't think the general public truly understands the size and magnitude of the housing crisis," he said.

Following the weekend's regional bank news, Andres said "the regional banks in my judgment are much more vulnerable at this point in time." He said the press has been focusing too much on the dangers of subprime mortgages. "What did IndyMac own? They didn't own subprime, and they went out of business. They owned Alt-A paper. And Alt-A is six times the size of subprime market."

Andres said that homeownership, at 67.8% in March, is still high compared with its late-1990s low of about 65.5%. Declines in home prices will impact mortgage-backed securities, opening up the possibility of more writedowns. "There's so much uncertainty here."

Andres also said that if oil continues to reverse, the dollar strengthens, and the Fed shows signs that it is not intent on raising rates, those events would have a positive impact on stocks.

However, said Andres, housing "Was the epicenter, is the epicenter, and will be until we get back to ownership rates that make sense."

Also Saturday,

XM Satellite Radio

(XMSR)

and

Sirius

(SIRI) - Get Report

got the government's blessing

on their long-awaited merger deal. XM closed the day down 12% at $8.17, and Sirius finished down 16% to $1.88 as both companies announced plans to refinance debt.

Elsewhere, the

The Wall Street Journal

reported Sunday that

Kohlberg Kravis Roberts

intends to go public

on the

New York Stock Exchange

.

As earnings season continues to chug along, foodmaker

Kraft

(KFT)

reported a year-over-year increase in profits, beating expectations. Kraft shares rose 4.9% to $30.83.

Tyson Foods

(TSN) - Get Report

, on the other hand, saw profits decline and fall short of estimates on rising chicken costs. Its stock skidded 7% to $15.09.

Wireless telecom company

Verizon

(VZ) - Get Report

announced second-quarter earnings that, excluding charges,

beat expectations

. Revenue, however, fell short of the Street's forecasts and Verizon traded down 2.5% to $33.60.

Away from earnings, automaker

Toyota

(TM) - Get Report

said it would scale back production for 2008 as it deals with soft U.S. demand, sending the stock down 3.6% to $88.54.

British-based diversified consumer company

Unilever

(UL) - Get Report

said it was selling its laundry detergent business to private-equity firm Vestar Capital Partners for $1.45 billion. The stock closed up 1.4% at $29.54.

In the pharmaceuticals space,

Amgen

(AMGN) - Get Report

announced late Friday that its osteoporosis drug denosumab had

success in a phase III study

, sending shares up 12% to $60.48.

As for commodities, crude oil climbed $1.47 to settle at $124.73 a barrel. Gold ticked up 90 cents to $927.70 an ounce. On Friday, the national average gasoline price dipped below $4 a gallon for the first time since May and was recently at $3.97 a gallon.

Treasury prices rose. The 10-year note was up 22/32 to yield 4.01%, and the 30-year was up 1-4/32, yielding 4.62%. The dollar was recovered to gain slightly on the euro and the pound but was still slightly off vs. the yen.

In global markets, the FTSE in London and the DAX in Frankfurt were weaker, as was the Hang Seng in Hong Kong. Japan's Nikkei, on the other hand, was rising.