Stocks slump in a turbulent session

Wall Street’s angst over the fallout from the credit crisis made for a turbulent end Friday to a volatile week -- stocks tumbled, soared and then turned south again as investors tried to assess the dangers faced by the country’s biggest mortgage finance firms, Fannie Mae and Freddie Mac.

The Dow Jones industrial average, which traded down more than 250 points in the session, briefly moved into positive territory before ending down more than 125 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 as it was earlier in the week, when their shares fell sharply over several sessions.

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

The concerns left the Dow down 128.48 points, or 1.1%, to end at 11,100.54. The index fell as low as 10,977.68. It last traded below 11,000 on July 25, 2006.

Broader stock indicators also logged declines. The Standard & Poor’s 500 index fell 13.90 points, or 1.1%, to 1,239.49, and the Nasdaq composite index fell 18.77 points, or 0.8%, to 2,239.08.

The Russell 2,000 index of smaller companies rose 4.51 points, or 0.7%, to 674.95.

Declining issues outnumbered advancers in Friday’s session by about 2 to 1 on the New York Stock Exchange.

Friday’s drop meant Wall Street moved squarely into a bear market, which is defined as a drop of at least 20%. The Dow is down 21.6% from its record closing high set in October. The S&P; 500 is down 20.8%, and the Nasdaq is off 21.7%.

For the week, the Dow fell 1.7%, the S&P; 500 lost 1.9% and the Nasdaq declined 0.3%. It was the fourth straight weekly decline for the Dow and the sixth consecutive weekly decline for the S&P; 500 and the Nasdaq.

Oil, meanwhile, continued its ascent, rising to a record of $147.27 during the day on tensions between the West and Iran. Crude futures closed up $3.43 to $145.08, slightly below a record close of $145.29 a barrel set more than a week earlier.

Treasury bond yields rose sharply as investors worried that a bailout of Fannie Mae and Freddie Mac could dent the government’s credit rating. The yield on the benchmark 10-year Treasury note jumped to 3.96% from 3.8% late Thursday. The dollar was mixed against other major currencies, while gold prices rose.

Worries about financial companies dominated stock trading. An index of financial stocks in the S&P; 500 lost 2.6%.

Freddie Mac fell 25 cents, or 3.1%, to $7.75, after trading as low as $3.89. Fannie Mae tumbled $2.95, or 22%, to $10.25 after trading as low as $6.68.

Lehman Bros. Holdings fell $2.87, or 17%, to $14.43 as traders fretted that the No. 4 investment bank would succumb to soured debt. JPMorgan Chase declined $1.35, or 3.9%, to $33.16, and Merrill Lynch fell $1.10, or 3.8%, to $27.61.

In other market highlights:

General Electric edged up 2 cents to $27.66. The conglomerate reported second-quarter profit that met analysts’ expectations, but the company said the outlook across its business lines was mixed.

Overseas, key stock indexes tumbled 2.7% in Britain, 2.4% in Germany and 3.1% in France. Shares in Japan fell 0.2%.