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) - Get Report

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) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

had previously announced similar refinancing plans.

Bloomberg

also reported that government-controlled mortgage companies

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

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) - Get Report

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) - Get Report

and

Morgan Stanley

(MS) - Get Report

had earlier this year successfully petitioned the Fed for bank holding company status.

Separately, the

Los Angeles Times

reported that

Goldman Sachs

had been encouraging its clients to bet against California bonds even as it was collecting fees to help California sell the same bonds.

Traders were also checking the automotive sector's vital signs. On Monday,

President-elect Obama

met with President Bush and suggested that the government offer assistance to the ailing industry. Obama's petition followed a request by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to expand the $700 billion

Troubled Asset Relief Program

to include automakers.

General Motors

(GM) - Get Report

has lately shown signs that it needs assistance. Late Monday, the carmaker said it would lay off 1,900 factory workers. The announcement followed GM's report of a $2.5 billion quarterly loss on Friday and a Deutsche Bank analyst report targeting GM's stock value at $0.

"It's not going to be pretty, but they need to change their business," said Church. He said a major problem is that consumers aren't excited about buying domestic cars. "They should be on the phone with

Apple CEO Steve Jobs saying, 'give me your industrial designers.'" He said if the major automakers had a product people actually wanted to buy, legacy costs would still be a factor, but companies like GM wouldn't be talked about as potential bankruptcy candidates.

Timothy Speiss, leader of Eisner LLP's Personal Wealth Advisors Group, said the worst-case scenario for GM is a bankruptcy declaration and reorganization of the company's financial obligation. The best case, said Speiss, is direct aid from the government, with strings attached.

As it stands, said Speiss, the automakers are a subsidized employment vehicle, and states with automakers account for a large portion of the recent rise in unemployment. He said that more cars should be fueled by something other than gasoline, and U.S. automakers have costs associated with pension and other benefits that are far beyond those of their competitors.

There's a separate problem, said Speiss. "Lack of consumer confidence is keeping buyers of cars out of showrooms," he said, and tightening lending standards are making it harder to buy cars. "It's very dubious that without connecting relief for GM ... to a broader strategy, it would be irresponsible to cut them a check," he said.

In the energy patch,

Chesapeake Energy

(CHK) - Get Report

and

StatoilHydro

(STO)

announced a joint venture to seek additional natural gas resources.

Meanwhile, cigarette maker

Altria

(MO) - Get Report

announced it would cut jobs in the face of an uncertain economic environment.

As for

earnings

, following Monday's close, coffee purveyor

Starbucks

(SBUX) - Get Report

reported a decline in profit and fell short of analysts' estimates. The company also said it would not provide earnings guidance for the upcoming year.

Homebuilder

Toll Brothers

(TOL) - Get Report

announced that its building revenue suffered a 41% decline for the latest quarter.

Telecom firm

Vodafone

(VOD) - Get Report

, meanwhile, announced falling profit for the first half of its fiscal year and reduced revenue guidance.

Analyst actions

were setting a few names in motion. Credit Suisse cut its price target on

American International Group

(AIG) - Get Report

to $1.50 from $3. Goldman cut its price target for

Google

(GOOG) - Get Report

to $475 from $520.

Shifting to commodities, crude oil was losing $3.67 to $58.74 a barrel. Gold was dropping $17.20 to $729.30 an ounce.

The U.S. bond market is closed Tuesday for Veterans Day. The dollar was rising vs. the euro and pound but softening against the yen.

Credit markets were continuing to thaw. Three-month dollar Libor, a measure of the rate banks charge one another for large loans, was down 6 basis points at 2.18%. Overnight Libor was set at 0.35%.

Abroad, European exchanges, including the FTSE in London and the DAX in Frankfurt, were mostly edging downward. In Asia, Japan's Nikkei and Hong Kong's Hang Seng both closed with losses.

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