Financial worries drag down stocks

Dow dropped 220, decliners over advancers 3-1 while NAZ declined 47. Market bleeding continues as I write, shaping up as another dreary day in late Aug trading. The financial index is weak again, heading back for the 267 monthly low.

S&P 500 FINANCIALS INDEX

Value 271.35

Change -5.74

% Change -2.1%

Oil is off pennies, still in the 114s, a weaker dollar is partially responsible. Oil at the pump is $3.68, down 10½% from its $4.11 peak just 6 weeks ago. The Alerian MLP index is down one, as selling thoughts bleed to these units.

Home sales continue gloomy. Sales were up, better than estimates but prices were down 7% while inventories rose.

• Existing Home Sales Top Estimates But Prices Plunge- AP

Fannie Mae Alert

Fannie Mae (FNM) & Freddie Mac (FRE) are embarrassments to the financial markets. The Federal Reserve will have to fix them, probably by weekend. The bond holders which really own the entire businesses will be kept whole, but stockholders will get what remains which looks to be near zero. FNM & FRE are getting clobbered by the credit crisis as they endure large mortgage writedowns.

Lehman (LEH) which rose on Fri on rumors that the Korean Development bank would "bail them out" is down 1. The Korean Development Bank is approaching any dealing cautiously, they are only looking for a bargain price.