Stocks end mostly lower even as oil prices retreat

Just days after the government said it would aid Fannie Mae and Freddie Mac if necessary, Federal Reserve Chairman Ben Bernanke told Congress the U.S. economy faces "numerous difficulties." During the day's testimony, Treasury Secretary Henry Paulson also said the Bush administration has no immediate plans to lend money to the mortgage giants or buy their stock.

Shares of Fannie and Freddie--which together hold or back nearly half of all the nation's mortgages--tumbled again.

The stock market did benefit from some bargain-hunting as oil retreated from its near-record levels, but the uncertainty of the financial sector made that recovery hard to sustain. If oil prices stabilize or retreat, consumers might feel more comfortable spending on discretionary items, and in turn help the economy.

"There's definitely a correlation between high energy prices and low consumer spending, and we need that to abate to get us a break," said Kim Caughey, equity research analyst at Fort Pitt Capital Group.

A barrel of light, sweet crude dropped $6.44 to settle at $138.74 on the New York Mercantile Exchange as traders bet that the weak economy in the United States and elsewhere will take its toll on global demand.

While some of the market's most battered bank stocks--including Washington Mutual Inc., Lehman Brothers Holdings Inc., and regional bank First Horizon National Corp.--finished higher Tuesday, most bank stocks gave up their brief rallies by the end of the session.

The Dow fell 92.65, or 0.84 percent, to 10,962.54. It was the blue chips' lowest close since July 21, 2006; the high price of oil is one of the major reasons the Dow has been trading at nearly two-year lows.

Broader stock indicators ended mixed. The Standard & Poor's 500 index fell 13.39, or 1.09 percent, to 1,214.91, while the Nasdaq composite index rose 2.84, or 0.13 percent, to 2,215.71.

The technology-dominated Nasdaq got a lift from Microsoft Corp., which rose $1, or 4 percent, to $26.15 after an Oppenheimer & Co. analyst said the software company's shares "look attractive" ahead of its quarterly results scheduled for Thursday.