Dow Falls 293 as Investors Cash Out

Broader stock indicators also declined. The Standard & Poor's 500 index fell 21.98, or 1.65 percent, to 1,308.76, and the Nasdaq composite index fell 35.79, or 1.58 percent, to 2,232.47.

Bond prices jumped as investors again looked for safety. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.37 percent from 3.50 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell sharply.

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Light, sweet crude fell $4.94 to settle at $104.48 per barrel on the New York Mercantile Exchange after government figures suggested the high price of oil and gasoline are damping demand for petroleum products.

Investors' relief over Morgan Stanley follows better than expected earnings news from Lehman and Goldman on Tuesday that gave the Dow its biggest point gain in more than five years. The Dow got an extra boost after the Fed's rate cut.

Morgan Stanley rose $1.07, or 2.5 percent, Wednesday to $43.93. Lehman fell $3.95, or 8.5 percent, to $42.54, while Goldman declined $8.66, or 4.9 percent, to $166.93.

The Office of Federal Housing Enterprise Oversight, which oversees government-backed Fannie and Freddie, said the changes should result in an immediate infusion of up to $200 billion into the market for mortgage-backed securities. This could mean greater demand for mortgages -- an aid for struggling homeowners hoping to refinance at more favorable terms.

Investors were upbeat about the moves at the mortgage companies. Fannie jumped $2.87, or 10 percent, to $31.09, while Freddie rose $3.86, or 15 percent, to $29.88.

The Fed has slashed key rates by more than half since last summer, when the mortgage crisis claimed its grip on the global credit markets. But the housing and lending industries are still hurting.

Late Tuesday, Visa Inc. launched the largest initial public offering in U.S. history, selling 406 million shares at $44 apiece to raise $17.9 billion. The world's largest credit card processor is not a lender, and many investors are betting that it will easily survive the faltering U.S. economy and credit climate. The stock traded up $14.49, or 33 percent, at $58.49.