Stocks Sway as Oil Retreats, Alcoa Skids

Stocks wavered in another volatile trading session Tuesday as existing-home sales fell more than expected, oil dropped $5 and Alcoa dragged on the Dow.

These wild see-saw sessions are likely to be the normthis summer, many strategists say, as the market searches for a bottom. With all three major indexes either in or just above bear-market territory, a bounce is on the horizon but bad news like the Fannie-Freddie worries of yesterday's session, is keeping it at bay.

Some strategists say the market could continue to slide this summer-- throwing out numbers as low as 9,200 for the Dow -- and that the entry point may not come until the fall.

"You are in a period now where the market is overshooting on the downside," market strategist Byron Wien said on CNBC's "Squawk Box" this morning. "I do think we're in a bottoming area, at least in terms of a potential rally," he said.

Wien says the market is, in fact, in the process of bottoming and should gather strength by the end of the year.

In the day's economic news: Existing-home sales dropped 4.7 percentin May, nearly the National Association of Realtors reported, following an upwardly revised 7.1-percent surge in April. Wholesale inventories rose 0.8 percent in May, though a gauge of how long it would take to work through the current inventory fell to a record low amid strong sales of apparel and petroleum.

Offering the market some support earlier were comments by Fed Chairman Ben Bernanke that the central bank may extend its emergency-lending programfor big Wall Street banks.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.

Asian and European stocks declined, rattled by the prior day's trading in the U.S., when mortgage financiers Fannie Mae and Freddie Mac fell to their lowest level in more than 14 years after a note from Lehman Brothers raised concerns that they might be forced to raise billions more in capital.

Fannie and Freddie rebounded out of the gate Tuesday as comments from the mortgage lenders' regulator helped assuage concerns but then wobbled through the rest of the day.

Fannie and Freddie are adequately capitalizedand continue to be active in the mortgage market, James Lockhart, director of the Office of Federal Housing Enterprise, which regulates the two enterprises, said in an interview with CNBC. A proposed accounting change that may affect trillions of dollars of mortgage bonds issued by Fannie and Freddie should not dictate their capital requirements, he said.

More gloom from the banking sector came as one of the biggest mortgage lenders, IndyMac, said after the bell on Monday it will eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer "well capitalized."

Merrill Lynch tumbled after a Wachovia analyst said the investment bank would likely record $5 billion in writedowns for the second quarter and post a loss for the quarter and full year.

Oil again retreated, falling about $5 a barrel to between $136 and $137 a barrel as fears decreased that a hurricane in the Atlantic Ocean would cause significant damage in the Gulf of Mexico production areas, and as the price fell for refined products. Oil dropped nearly $4 Monday.s

The energy sector declined nearly 3 percent; Dow components ExxonMobil and Chevron were off more than 1 percent.

(How should you play commodities right now? Click on the video at left.)

Pepsi Bottling Group beat expectations as price increases in the U.S. and Canada more than offset a decline in volume.

The largest bottler of PepsiCo drinks said net income rose 7.4 percent to $174 million, or 78 cents per share, in its fiscal second quarter ended June 14, from $162 million, or 70 cents per share, a year earlier.

Analysts' average forecast was 75 cents per share for the bottler.

The earnings season officially starts with Dow component Alcoa reporting results after the bell.

Alcoa was the biggest drag on the Dow, falling more than 6 percent, as analysts expect flat aluminum prices and increasing energy and other input costs will take a toll on its results. Seven of the 15 analysts who cover Alcoa -- including two this morning -- have slashed their earnings estimates for Alcoa.

On the M&A front, Microsoft said on Monday that a successful shareholder rebellion would encourage it to renew its bid to buy Yahoo's Internet search engine or possibly the entire company.

Investors will also be looking to see if Merrill Lynch sells its stakes in BlackRock and Bloomberg to raise cash, and for any new developments in the long, drawn-out InBev takeover offer for Anheuser-Busch.

The Calendar:

TUESDAY: Consumer credit; Alcoa earnings
WEDNESDAY: Weekly mortgage applications; crude-inventories report
THURSDAY: Monthly retail sales; jobless claims; Fed's Yellon speaks; Marriott earnings; Chevron interim report
FRIDAY: Import/export prices; international trade; consumer sentiment; Treasury budget; GE earnings; Apple's iPod 3G hits store shelves

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