Wall Street ended a nervous trading day in the red as fears about regional banks grew louder in the wake of the failure of IndyMac. 

Today's Market

The Dow Jones Industrial Average slid 45.35 points, or 0.41% to 11055.19, the Standard & Poor’s 500 index fell 11.19 points, or 0.90%, to 1228.30 and the Nasdaq Composite Index lost 26.21 points, or 1.17%, to 2212.87 The consumer-friendly FOX 50 fell 5.48 points, or 0.62% to 874.49.

The day began with promise as the Dow soared more than 125 points on a bounce-back from financial stocks after the government moved to firm up confidence in the market. The rebound was short-lived as stocks quickly gave back those gains, closing the day in the red. 

“If you blinked, you missed it," Ted Weisberg of Seaport Securities told FOX Business. "For the most part it's all doom and gloom.”

Much of that negativity surrounded Fannie Mae (FNM) and Freddie Mac (FRE),  the two government-sponsored companies that have been at the forefront of the nervous market action over the past week. Fannie and Freddie closed in negative territory despite a new government plan to ensure the companies have enough liquidity. 

Bank of America (BAC) led the decliners on the Dow on Monday, tumbling another 7%. Other financial names like Citigroup (C), and JPMorgan Chase (JPM) also suffered big losses. On the upside McDonald's (MCD) and Coca-Cola (KO) also gained more than 1% each. 

Aside from the latest developments from Fannie and Freddie, Wall Street was buzzing about the failure of California bank IndyMac (IMB), Anheuser-Busch's (BUD) agreement to be sold for more than $50 billion and the latest developments that show no love has been lost between Microsoft (MSFT) and Yahoo! (YHOO). 

Regional banks plunged on Monday as the market worried about a repeat of IndyMac, which last Friday became the third-largest bank failure ever, based on adjusted-assets. IndyMac's failure was caused by a slow run on the bank, one that regulators blamed at least in part on comments made by a Sen. Chuck Schumer, D-NY. Schumer fired back, arguing IndyMac's regulator should have stopped the bank's "poor and loose" lending practices. 

The Federal Deposit Insurance Corporation, commonly known as FDIC, has taken over the newly-chartered IndyMac Federal Bank. IndyMac was a major mortgage specialist, offering Alt-A loans that didn't typically require income or asset documentation. 

"Who’s the next shoe to drop? I think you have a real fear that IndyMac is the first in a long parade," said Art Hogan, chief market strategist at Jeffries & Co.

As a reflection of those fears, shares of Washington Mutual (WM) plummeted more than 30% to 17-year lows. The bank wasn't helped by a new report from Lehman Brothers, which said it sees WaMu posting up to $26 billion in losses and not turning a profit until the second half of 2009. Monday evening WaMu released a statement saying it is well-capitalized and has recently raised $7.2 billion in capital and tangible equity. 

“There is a fear factor that continues to roam. It just extends the claws of the ugly bear," said Peter Cardillo, chief market economist at Avalon Partners. 

Also, National City (NCC), a regional bank based in Cleveland, fell by 15% on market rumors. The bank released a statement during the day to say it is "experiencing no unusual depositors or creditor activity." 

The bank fears come after after the Treasury Department and the Federal Reserve spent much of the weekend trying to shore up market confidence. The government announced a backstop for Fannie Mae and Freddie Mac, the mortgage giants that own or back $5 trillion of U.S. mortgages.  

The Treasury asked lawmakers for authority to increase its credit line in Fannie and Freddie from the current $2.5 billion and to buy equity in both companies, if needed. Separately, the Fed granted Fannie and Freddie emergency borrowing from its discount window, if needed.

The moves bolstered market sentiment regarding the companies' debt, as Freddie saw stronger-than-expected demand for a $3 billion bill auction Monday morning. However, the government action didn't do much to improve sentiment on the equity side as both stocks closed sharply lower during a volatile session. 

Fannie and Freddie are shareholder-owned companies that were originally chartered by the government to buy mortgages from banks and package them into securities. Together they own or back more than half of the outstanding mortgages in the country. 

Meanwhile, oil prices closed slightly higher on Monday, rising 10 cents to close at $145.18 a barrel. The energy market stayed hot as Brazilian oil giant Petrobras (PBR) said a week-long strike could reduce oil production by 136,000 barrels a day, or 7% of its production. Crude failed to cool off even after the White House said President Bush plans to lift the executive ban currently on offshore oil drilling. 

Corporate Movers

Anheuser-Busch (BUD) agreed to sell itself to Belgian-Brazilian beer giant InBev for $70 a share, ending the storied U.S. brewer's independence. The deal, which values Anheuser at $52 billion, represents an increase of $6-a-share from the original offer. It also marks a dramatic shift from a week ago when the two companies were sparring in press releases and in court documents. The new company will be named Anheuser-Busch InBev and will be the world's largest brewer. InBev makes Stella Artois, Beck's and other brands. 

Yahoo!’s (YHOO) board met over the weekend and rejected a new proposal from Microsoft (MSFT) that would have broken up Yahoo! and ousted its board and CEO Jerry Yang. The proposal would have given Microsoft Yahoo's coveted search business, with the rest of the company going to investor Carl Icahn. The rejection marked the clearest indication that Icahn and Microsoft are cooperating to taking over or split up Yahoo!. 

General Motors (GM) scheduled a news conference for Tuesday morning to discuss a realignment of its business to "current market conditions." The auto maker said CEO Rick Wagoner will hold the news conference in Detroit at 9 a.m. EDT. GM's stock closed sharply in the red on Monday and has fallen 60% so far in 2008. 

Waste Management (WMI) unveiled a $6.19 billion all-cash deal to acquire disposal company Republic Services (RSG). The offer values Republic at $34 a share, a 22% premium to its close on Friday. It is also an alternative to Republic's offer to acquire No. 2. garbage disposal company Allied Waste Industries (AW) for $6.24 billion, according to Dow Jones. Separately, Waste Management said it sees adjusted-earnings of 61 cents to 62 cents a share in the second quarter, topping mean estimates of 58 cents. 

Alcoa (AA) was among the best performers on the Dow after the aluminum giant was reportedly upgraded to "buy" from "neutral" by Goldman Sachs. The firm cited higher demand and power constraints that will up the price of aluminum over the next three years, according to Thomson Reuters. Goldman also reportedly upped its price target to $50 from $46. 

Macy's (M) jumped after JPMorgan upgraded the retailing giant to "neutral" from "underweight." The firm cited the 38% decline the stock has taken since April ended, sought to debunk liquidity worries and also predicted Macy's will meet estimates when it posts quarterly results next month. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, gained 18.46 points, or 0.58%, to 3216.24. The FTSE 100, London's benchmark index, rose 38.80 points, or 0.74%, to 5300.40.

On the continent, Paris's CAC 40 Index picked up 41.89 points, or 1.02%, to 4142.53 while Germany's DAX gained 46.95 points, or 0.76%, to 6200.25.

In Asia, Japan's benchmark Nikkei 225 Index dropped 29.53 points, or 0.23%, to 13010.16. Hong Kong's Hang Seng fell 170.09 points, or 0.77%, to 22014.46.