* Freddie Mac posts loss, to slash dividend
* Oil edges up but still below $120/bbl
* Cisco rises on comments about outlook
* U.S. weekly energy inventories data on tap
* Dow off 0.6 pct, S&P down 0.6 pct, Nasdaq off 0.4 pct
(Updates to early morning)
By Ellis Mnyandu
NEW YORK, Aug 6 (Reuters) - U.S. stocks fell on Wednesday,
led lower by financial shares after home finance company
Freddie Mac <FRE.N> posted its fourth straight quarterly loss
and braced for more fallout from the housing slump.
Freddie Mac's weaker-than-expected loss dealt investors a
blow a day after Wall Street had its biggest one day advance in
four months.
Freddie Mac said it was setting aside twice as much money
for bad loans and made plans to slash its dividend by at least
80 percent. For details, see []. Its shares fell
16 percent, while bigger rival Fannie Mae <FNM.N> declined 12
percent.
The two, known as government-sponsored enterprises and
holding or guaranteeing nearly half of the $12 trillion in U.S.
mortgages, have been pummeled by the housing downturn. The S&P
500 financial index <.GSPF> fell 2 percent.
"Freddie Mac was not a vitamin pill this morning. It
clearly wasn't good news," said Stephen Massocca, co-chief
executive at San Francisco-based investment bank Pacific Growth
Equities.
"When you lower the dividend, people get out of the stock
for that reason."
The Dow Jones industrial average <> fell 66.52 points,
or 0.57 percent, to 11,549.25. The Standard & Poor's 500 Index
<.SPX> declined 7.46 points, or 0.58 percent, to 1,277.42. The
Nasdaq Composite Index <> slipped 10.18 points, or 0.43
percent, to 2,339.65.
U.S. front-month crude <CLc1> was up 49 cents at $119.62 a
barrel on the New York Mercantile Exchange. Weekly U.S. oil
inventory data is due at 10:35 a.m. (1435 GMT).
Some investors, doubting stocks will sustain gains, also
book profits after Tuesday's broad surge, sparked by a drop in
oil to three-month lows and hints from the Federal Reserve it
will be in no rush to raise interest rates.
Freddie Mac shares dropped to $6.78, while Fannie Mae
declined to $11.93. Both trade on the New York Stock Exchange.
Shares of insurer American International Group <AIG.N> , a
gainer on Tuesday in the financial sector, fell 5.2 percent to
$28.33.
Among banks, shares of Bank of America Corp <BAC.N>, fell
2.8 percent to $32.65. Freddie Mac, which also announced plans
to slash its dividend, doubled its reserves for losses on
delinquent loans and home foreclosures.
Last month fears that Freddie Mac and Fannie Mae, critical
players in the U.S. housing market, faced capital constraints
roiled markets and resulted in a sweeping rescue effort by
Washington to bolster their finances.
On Nasdaq, shares of Apple Inc <AAPL.O>, the iPod and
iPhone maker, fell 1.1 percent at $158.92. But Nasdaq losses
were limited by a 4.2 percent rise to $23,59 in Cisco Systems
Inc's <CSCO.O> shares, a day after the network equipment maker
said it expected the weak economic environment to be relatively
short.
(Editing by Kenneth Barry)
