Stocks end lower amid worries on Fannie, Freddie

The Dow Jones industrial average, which traded down more than 250 points in the session, briefly moved into positive territory Friday before ending down more than 128 points. The blue chips also traded below 11,000 for the first time in two years. And all the major indexes ended with another losing week.

A new high for oil prices above $147 a barrel also weighed on stocks.

The fate of the government-chartered companies was a focus of trading Friday as it had been earlier in the week. Shares of Fannie Mae and Freddie Mac fell sharply over several sessions on concerns about their stability. Wall Street is worried that a collapse of the two financiers would cause further shock to the financial system, and trigger more losses to banks and brokerages with significant holdings of mortgage-backed securities.

The well-being of Fannie Mae and Freddie Mac is crucial because they hold or guarantee about $5 trillion worth of mortgages, or about half the outstanding mortgages in the United States. Their troubles are just the latest depressing turn in a year-old credit crisis that shows no sign of ending, disappointing some stock traders who thought just months ago that the worst was perhaps over.

Stocks fluctuated late in the session amid varying reports that the Federal Reserve could aid Freddie Mac and Fannie Mae.

Sen. Christopher Dodd, D-Conn., the Senate Banking Committee chairman, raised the prospect that the companies could be given access to emergency Federal Reserve lending. Dodd, who spoke Friday to Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson, said the two are "looking at various options" for propping up the firms if they ultimately need help. Those include giving them access to the Fed's emergency lending "discount window," Dodd said.

But a Fed spokeswoman said later the central bank had not talked with Fannie and Freddie about the emergency lending program. She declined to discuss any other options being considered.

Earlier this year, the Federal Reserve took the unprecedented step of offering direct loans to investment banks from its discount window.

Some observers noted that Freddie Mac and Fannie Mae weren't short of cash, but of access to capital.