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Stocks Off to a Shaky Start

Stocks Off to a Shaky Start

U.S. stocks are searching for direction, a day after rallying on the government bailout of Fannie Mae and Freddie Mac. Each of the three major indices is trading lower in early going.

U.S. stocks are searching for direction, a day after rallying on the government bailout of Fannie Mae and Freddie Mac. Each of the three major indices is trading lower in early going.

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) and

Freddie Mac

( FRE).

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) - Get Free Report

, 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), has ended talks with the struggling brokerage.

Meanwhile, mining company

Sasol

(SSL) - Get Free Report

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) - Get Free Report

, said that slowing global demand for commodities will bring shareholders of

Rio Tinto

( RTP) 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)

and

BB&T

(BBT) - Get Free Report

to hold from buy and to sell from hold, respectively.

Wachovia

(WB) - Get Free Report

also took a hit from Merrill Lynch, which cut the bank to underperform from neutral.

Merrill also took consumer conglomerate

Procter & Gamble

(PG) - Get Free Report

down a peg, to neutral from outperform, saying the stock trades at an unjustified premium.

Homebuilders

Pulte Home

(PHM) - Get Free Report

and

KB Home

(KBH) - Get Free Report

both got downgraded at Credit Suisse to neutral from outperform.

As for economic data, a read on July pending-home sales, as well as the Census Bureau's look at wholesale inventories, are expected to be released Tuesday morning.

Looking at commodities, the price of crude oil was down $1.78 to $104.56 a barrel. Gold was shedding $10.40 to $792.10 an ounce.

Prices of longer-dated U.S. Treasury securities were rising slightly. The 10-year was up 3/32 to yield 3.66%, and the 30-year was adding 16/32, yielding 4.24%.

Overseas, European indices, such as London's FTSE and Frankfurt's Dax, were mainly trading higher. In Asia, the Nikkei in Japan and the Hang Seng in Hong Kong lost ground.