Despite a late-day comeback effort, Wall Street ended the week deeply in the red as the cloud of uncertainty hovering over Fannie Mae and Freddie Mac loomed larger and oil prices jumped over $147 a barrel. 

The gloomy developments briefly sent the Dow below the 11,000 level for the first time in two years. 

Today's Market

The Dow Jones Industrial Average slid 128.48 points, or 1.14% to 11100.54, the Standard & Poor’s 500 index lost 13.88 points, or 1.11%, to 1239.51 and the Nasdaq Composite Index tumbled 18.77 points, or 0.83%, to 2239.08. The consumer-friendly FOX 50 fell 8.73 points, or 0.98% to 879.97.

Friday's rollercoaster ride on the stock market included several triple-digit declines and an afternoon comeback that the market eventually gave back. The chaotic action highlights the uncertainties in the market place, especially fears that the government may need to rescue mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).

“We’ve got a perfect storm of bad news today," said Art Hogan, chief market strategist at Jeffries & Co, who pointed out that the market has been down on 72% of the Friday's in 2008. “Unfortunately we’ve got a series of events that aren’t new, but nonetheless are extremely bothersome."

The bad news sent the Dow to fresh two-year lows, with the index falling below 11,000 for the first time since July 2006. The blue chips have plunged more than 2,000 points in just the past two months as Wall Street has grown very gloomy on soaring oil and a lack of confidence in the financial system. Friday's selloff also pushed the three major indexes back into bear market territory, which indicates a 20% decline from 52-week lows. 

“I think there is still a ways to go on the downside in the long-term. I think the bottom of the bear market will not be seen until next year," said Peter Boockvar, equity strategist at Miller Tabak. 

Banking giant Bank of America (BAC) and Chevron (CVX) took the biggest hits on the Dow, falling more than 4% each. On the upside, General Motors (GM) jumped more than 2%. 

The stock market's ups and downs closely tracked those of Fannie and Freddie, the two government-backed entities that own or guarantee about $5.2 trillion of the U.S. mortgage market. 

The stocks plunged to levels unseen since the early 1990s on a The New York Times report indicating that the U.S. government is contemplating taking over the companies in the event their financial problems worsen. If such a scenario occurred, shareholders could be left with virtually nothing. Treasury Secretary Henry Paulson issued a statement that gave no hint of a government-led rescue. 

Fannie and Freddie made a comeback effort after Reuters reported Federal Reserve Chairman Ben Bernanke told Freddie chief Richard Syron that his company and Fannie Mae would be eligible to use the central bank's emergency discount window. Fears that the economically-crucial companies could need to raise more money or might even fail have risen dramatically this week.

“We need to see some light at the end of the tunnel. Until we see it I think the direction is quite obvious,” Ted Weisberg of Seaport Securities told FOX Business earlier in the day regarding Fannie and Freddie. 

Trading volume on Fannie and Freddie were extremely high, as the pair of stocks accounted for roughly half of all trades on the New York Stock Exchange. Fannie closed off 22% in the red, halving its earlier losses of 50%. Freddie's stock briefly turned positive but ended the day 6% lower. 

On top of the turmoil in the financial markets, crude oil spiked for the second straight day, soaring to a new all-time record of $147.27 a barrel. However, oil prices cooled off some Friday afternoon, closing up $3.43 at $145.08.  A day ago oil prices surged more than $4 in the final hour of trading, ending at $141.65 a barrel. 

Oil was pushed higher on worries that geopolitical tensions in Iran and Nigeria, two major oil producers, would impact global supplies. Also, the U.S. dollar helped push the price of oil higher. The greenback was recently down 0.5% against the Euro. The record oil prices have been detrimental to the economy, weighing on consumer spending and corporate profits. 

The financial sector troubles do not end with Fannie and Freddie, as shares of Lehman Brothers (LEH) and Wachovia (WB) took double-digit percentage tumbles on Friday. Citi slashed its price target on Wachovia, predicted a 2008 loss of $1.24 per share and said it expects the bank to cut its dividend by 75%. S&P Equity Research cut its price target on Lehman by $7 to $20, keeping a "hold" rating on the investment bank. 

Corporate Movers

General Electric (GE) released its second-quarter results, which were mostly in line with analyst estimates. GE's adjusted-earnings fell by 5.8% to 54 cents per share on $46.89 billion in revenue. Analysts interviewed by Thomson Reuters were expecting earnings at 54 cents a share on $45.31 billion in revenue. The company sees third-quarter earnings that may come in below the Street's forecast. The company did maintain its full-year earnings forecast of $2.20 to $2.30 a share. 

InBev upped its takeover offer for Anheuser-Busch (BUD) by $5 to $70 a share  in the hopes of completing a friendly deal and avoiding a lengthy takeover, The Wall Street Journal reported on Friday. Despite increasing hostilities between the two brewing giants and ample political opposition, the companies have entered into friendly talks, the Journal reported. One source told the newspaper that Anheuser is likely to sign off on the $50 billion deal this weekend. Shares of Anheuser soared to all-time records on the news. 

Citigroup (C) plans to unload its German retail banking business to a French bank for $7.7 billion. The banking conglomerate announced the sale of its Citibank Privatkunden to Credit Mutuel on Friday morning. Citi said the deal will give it an after-tax gain of $4 billion. 

Data Dump

Wall Street also received evidence on Friday about how the negative economic news has impacted the consumer's psyche. The Reuters/University of Michigan consumer sentiment index rose slightly to 56.6 in mid-July, compared to 56.4 in June. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, fell 85.23 points, or 2.60%, to 3197.78. The FTSE 100, London's benchmark index, lost 145.20 points, or 2.69%, to 5261.60.

On the continent, Paris's CAC 40 Index dropped 130.92 points, or 3.09%, to 4100.64 while Germany's DAX declined 151.70 points, or 2.41%, to 6153.30.

In Asia, Japan's benchmark Nikkei 225 Index added 27.52 points, or 0.21%, to 13039.69. Hong Kong's Hang Seng gained 362.77 points, or 1.66%, to 22184.55.