Fannie Mae and Freddie Mac and Oil, not the perfect threesome

U.S. stocks tumbled Friday as fears about the stability of the top two home financing providers Freddie Mac and Fannie Mae, combined with oil at a record above $147, clouded the economic outlook.Fannie Mae fell 22.4 percent to $10.25, off a session low at $6.68, and topping the list of the New York Stock Exchange's biggest percentage losers. In contrast, Freddie Mac slipped 3.1 percent to $7.75, off a session low at $3.89. Earlier, Freddie Mac turned positive and hit an intraday high at $8.57 in volatile trading.Friday's slide capped a tumultous week, in which the S&P 500 joined the Nasdaq and the Dow in a bear market. It was the Nasdaq and the S&P 500's sixth straight weekly decline, their longest weekly losing streaks since 2004.The broad market ended Friday's session down 1 percent as investors worried that the two pillars of the U.S. housing market could run short of capital, placing the fragile U.S. economy at even greater risk.Fannie Mae and Freddie Mac traded erratically and ultimately ended lower. Pressure mounted for the U.S. government to act more swiftly to prevent the housing crisis from dragging down the nation's top mortgage finance agencies, as Treasury Secretary Henry Paulson indicated that a bailout was unlikely.A jump in U.S. crude oil prices to a record above $147 per barrel further soured investor sentiment on concerns about the impact of higher fuel costs on corporate profits and consumer spending."The bottom line is that we're in the middle of a financial tsunami. This is a storm the likes of which this country hasn't seen," said Peter Kenny, managing director at Knight Equity Markets in Jersey City.The Dow Jones industrial average fell 128.48 points, or 1.14 percent, to 11,100.54. For the week, the Dow dropped 1.7 percent, its fourth straight weekly decline.The Standard & Poor's 500 Index slid 13.90 points, or 1.11 percent, to 1,239.49. For the week, it fell 1.9 percent.The Nasdaq Composite Index dropped 18.77 points, or 0.83 percent, to 2,239.08. It shed 0.3 percent for the week.But all three indexes ended off their session lows. At one point, all three indexes were down more than 2 percent, with the Dow briefly dipping below the 11,000 level for the first time since July 2006. In a volatile session, major indexes also briefly turned positive in the late afternoon.U.S. crude for August delivery rose $3.43, or 2.4 percent, to settle at $145.08 a barrel on the New York Mercantile Exchange, after earlier hitting a record of $147.27.Senator Christopher Dodd, who chairs the Senate Banking Committee, said the U.S. Federal Reserve was considering allowing Fannie Mae and Freddie Mac to borrow directly from the central bank, spurring speculation that the Fed may take action as early as this weekend. That helped the two stocks come off their lows during afternoon trading, with Freddie Mac at one point fleetingly turning positive.Financial shares were among the biggest drags on the S&P 500 as new signs of distress in financial market spooked investors. An S&P financial index fell 2.6 percent.Shares of American International Group Inc fell 3.8 percent to $23.08 as investors worried the giant insurer, already beaten down by mortgage write-downs, could post more losses.Citigroup cut its estimates and price targets on several U.S. banks, including JPMorgan Chase & Co and Bank of America Corp, on higher assumed losses on credit card, home equity, residential construction, and a sustained weak capital markets environment. JPMorgan shares fell 3.9 percent to $33.16, while Bank of America shares slid 3.1 percent to $21.67.Lehman Brothers shares slid 16.6 percent to $14.43, a day after shedding 12 percent on discredited rumors of customers pulling back their exposure to the investment bank.Chevron Corp shares fell 4.2 percent to $92.25, ranking as the top drag on both the Dow and the S&P 500, after the second-largest U.S. oil company said it expects its refining and marketing operations to post a loss in the second quarter, somewhat restraining earnings that will be mostly driven by record oil and natural gas prices.Airlines' and retailers' stocks were among those most adversely affected by soaring oil prices. An airline index fell 5.6 percent, while an index of retailers shed 2.1 percent.General Electric was unable to hold on to gains amid the broad sell-off, ending up a mere 0.1 percent, or 2 cents, at $27.66, a day after it posted second-quarter profit in line with Wall Street expectations.Shares of Anheuser-Busch Cos Inc, an S&P 500 component, soared 8.6 percent to $66.50 after a source said the maker of Budweiser beer and Belgian-Brazilian rival InBev NV have begun negotiations for a friendly merger.On the economic front, the Reuters/University of Michigan Surveys of Consumers showed U.S. consumer confidence rose unexpectedly in June with the help of retail discounts.Trading was fairly active on the New York Stock Exchange, with about 1.73 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.38 billion shares traded, above last year's daily average of 2.17 billion.Declining stocks outnumbered advancing ones on the NYSE by 2 to 1 and by about 15 to 14 on the Nasdaq.