Wall Street sank further into a bear market Friday, as investors dumped stocks on troubles at mortgage companies Fannie Mae and Freddie Mac and oil's continuing climb into record territory. The Dow Jones industrials slid below the 11,000 mark for the first time in two years before paring their losses.
Investors appeared unimpressed by a statement from Treasury Secretary Henry Paulson, who said the government's focus is ensuring that Fannie Mae and Freddie Mac keep operating in their current form -- countering reports that the government was contemplating plans to take over one or both of the companies.

The government-chartered companies have fallen sharply in recent days 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. 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.
Meanwhile, Citigroup Inc., also struggling with the consequences of failed mortgages, announced it will sell its German retail banking operation to France's Credit Mutuel for $7.7 billion. Global banks and brokerages have scrambled to sell assets and raise capital in an effort to offset nearly $300 billion of write-downs linked to the credit crisis.
Investors also had little reason to shop for bargains Friday because many financial companies are reporting results next week and are expected to announce another round of big write-downs. And there is nervousness on Wall Street over corporate results in general; they're expected to be down overall, and if results are worse than forecast, stocks could take yet another beating.
The market's other trouble spot, oil, continued its ascent on supply concerns. A barrel of oil vaulted to a record above $147, raising more concerns about inflation and the overall economy.
"You have two issues: Crude popped back up $10 to $11 in the last few days, and that is causing some concern. The second point is the financial services sector. There is concern and speculation that Freddie, Fannie and Lehman won't be around on Monday. That's obviously causing worry," said Phil Orlando, chief equity market strategist at Federated Investors.
In mid-afternoon trading, the Dow fell 173.54, or 1.56 percent, to 11,053.48 after having fallen to 10,977.68, a drop of 251.34. It last traded below 11,000 on July 25, 2006.
Broader stock indicators also skidded lower. The Standard & Poor's 500 index fell 20.32, or 1.62 percent, to 1,233.07, and the Nasdaq composite index fell 37.35, or 1.65 percent, to 2,220.50. Friday's drop meant Wall Street moved squarely into a bear market, which is defined as a 20 percent drop from a recent peak. At its low Friday, the Dow was down 22.5 percent from the record closing high of 14,164.53 it reached in October. The S&P 500 was down 21.7 percent and the Nasdaq was off 22.9 percent.

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