Subprime woe, Bernanke talk hit stocks; IBM up late

By Kristina Cooke

NEW YORK (Reuters) - U.S. stocks fell on Wednesday on deepening concerns that a crisis in lending could spread and a warning from the Federal Reserve chairman that weakness in housing could hurt economic growth for some time.

Disappointing results from technology bellwethers also weighed on stocks. Shares of Intel Corp. (INTC.O) and Yahoo (YHOO.O) fell nearly 5 percent after their quarterly scorecards fell short of some expectations.

The sour mood was set late Tuesday when Bear Stearns said two hedge funds with big bets on the sector were nearly worthless, confirming Wall Street's worst suspicions. Then Fed chief Ben Bernanke further rattled investors by saying that the worst was not over for the housing downturn.

"Subprime concerns are driving the market lower -- is Bear Stearns an isolated situation or is it contagious?" said Georges Yared, chief investment strategist at Yared Investment Research, in Minneapolis.

"And the chairman of the Fed is throwing cold water on the parade in terms of lower growth expectations and an extended housing correction."

The Dow Jones industrial average .DJI was down 53.33 points, or 0.38 percent, to end at 13,918.22, a day after it hit an intraday high above the 14,000 milestone.

The Standard & Poor's 500 Index .SPX was down 3.20 points, or 0.21 percent, to finish at 1,546.17. The Nasdaq Composite Index .IXIC was down 12.80 points, or 0.47 percent, to close at 2,699.49.

All major indexes fell more than 1 percent to session lows just after midday. But during the afternoon, shares of major energy companies helped curb some of the market's losses. Exxon Mobil (XOM.N) gained 2.3 percent to $91.15, as U.S. crude oil CLQ7 ended up 1.4 percent, or $1.03, at $75.05 a barrel.

After the closing bell, shares of IBM (IBM.N), the world's largest technology services company, rose 1.2 percent to $112.40 after its earnings beat estimates.

But eBay Inc.'s (EBAY.O) shares fell 1 percent to $33.70 in extended trade. The Internet auctioneer posted a net profit just above the average analysts' estimate and left its 2007 outlook unchanged, defying Wall Street's hopes for a boost.

MORTGAGE MISERY

During the regular session, shares of investment bank Bear Stearns Cos Inc. BSC.N fell 0.4 percent to $139.34 on the New York Stock Exchange.

But Bear Stearns was not the only company causing investors concern, with the search on for further fallout from the lending crisis.

Lehman Brothers Holdings Inc. LEH.N stock fell on market rumors --which were denied by a spokeswoman at the bank-- that the investment bank would announce its exposure to subprime loans was wider than previously disclosed.

Lehman's stock was down 1.9 percent at $71.65 after falling to a session low of $70.30 on the NYSE.