NEW YORK, Nov 21, 2007 (AP) -- Wall Street pulled back again Wednesday, finding little to placate its worries about the wilting mortgage market ahead of Thanksgiving. The Standard & Poor's 500 index and the Dow Jones industrial average had each been down more than 1 percent before paring some of their losses.

The yield on the Treasury's 10-year note fell below 4 percent for the first time since 2005 as investors sought the safety of government securities.

The stock market has been thrashing around recently as investors attempt to gauge how companies around the world will fare amid a further slowdown in the U.S. housing market, deterioration of credit and record oil prices that crested overnight above $99 a barrel. Stocks have fallen in seven of the previous nine sessions.

With the housing market worsening _ the Mortgage Bankers Association said mortgage application volume fell 3.6 percent last week _ financial institutions continue to suffer.

Government-sponsored lender Freddie Mac, which reported a $2 billion quarter loss Tuesday and saw shares plummet nearly 29 percent, declined another 3.7 percent early Wednesday after an analyst downgrade. Freddie's counterpart Fannie Mae also dropped for a second straight day, as did Countrywide Financial Corp., the nation's largest mortgage lender.

In other economic readings, the Conference Board suggested an economic slowdown could accelerate in the coming months amid rising costs and further weakness in the housing market. Also, the Reuters/University of Michigan consumer sentiment survey for November showed a decline to 76.1 percent from 80.90 in October.

The Commerce Department said jobless claims fell by 11,000 last week, a positive sign for U.S. employment, but the report did not alleviate anxiety about the potential for weaker consumer spending.

In midmorning trading, the Dow fell 108.11, or 0.83 percent, to 12,902.03.

Broader stock indicators also fell. The Standard & Poor's 500 index dropped 13.66, or 0.95 percent, to 1,426.04, and the Nasdaq composite index slumped 27.81, or 1.07 percent, to 2,569.00.

Government bonds rose amid the economic uncertainty. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.05 percent from 4.09 percent late Tuesday.

The dollar rose against most other major currencies, but fell precipitously versus the yen. Gold advanced.

And with oil prices briefly reaching a high of $99.29 a barrel in overnight electronic trading, the question among investors is no longer if oil will reach $100 a barrel, but when _ and how long it will stay there. Crude futures recently fell 23 cents to $97.80 a barrel on the New York Mercantile Exchange. Whether they settle at a new record will depend much on the Energy Department's inventory report, scheduled to be released at 10:30 a.m.

Stocks managed to finish with a gain Tuesday after a somewhat baffling pair of reports from the Federal Reserve. The Fed's minutes from its last meeting called its last rate reduction a "close call," but the central bank's economic forecast seemed to imply it is willing to keep lowering rates.

Wall Street is fairly confident the Fed will lower rates at its Dec. 11 meeting to keep the tight credit markets liquid, but it is uncertain if the economy is safe _ particularly given big losses at Freddie Mac and its counterpart Fannie Mae, and possible liquidity problems at Countrywide.

In an interview with The Wall Street Journal, U.S. Treasury Secretary Henry Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than this year.

Amid worries that both the private and government lending industries are struggling with the mortgage market implosion, Freddie shares fell $1, or 3.7 percent, to $24.74; Fannie fell 39 cents to $27.88; and Countrywide fell 86 cents, or 8.4 percent, to $9.42.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 215.9 million shares.

The Russell 2000 index of smaller companies fell 8.22, or 1.10 percent, to 741.11.

Overseas, Japan's Nikkei stock average closed down 2.5 percent and Hong Kong's Hang Seng index fell 4.15 percent. In afternoon trading, Britain's FTSE 100 fell 1.58 percent, Germany's DAX index declined 1.28 percent, and France's CAC-40 lost 2.16 percent.

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