Tough day on Wall Street

NEW YORK (CNNMoney.com) -- Stocks slipped Monday afternoon as investors welcomed the White House's pledge to aid subprime mortgage holders, but continued to worry about how the housing and credit market crisis will hurt the economy in the long run.

The Dow Jones industrial average (Charts) lost 0.4 percent. The broader S&P 500 (Charts) index lost 0.6 percent. The tech-fueled Nasdaq (Charts) composite lost 0.9 percent.

Treasury prices rose, lowering the corresponding yields, as investors sought safety in government debt.

Treasury Secretary Henry Paulson, speaking at the National Housing Forum Monday, said the United States is aggressively pursuing relief for struggling subprime mortgage holders.

Paulson outlined steps the government is taking to help troubled homeowners, but didn't provide more details on plans for freezing interest rates at the lower levels. Details are expected by the end of the week.

The comments initially gave some stability to the markets, but any gains were short lived, with stocks turning lower again in the afternoon. Financial, housing and technology were the leaders on the downside.

Investors are looking for concrete news that financial market conditions are improving, said Rob Lutts, chief investment officer at Cabot Money Management. Should the White House announce plans to help bail out struggling homeowners, that would help with the perception that conditions are improving.

"But it's going to take a long time for the housing and mortgage sectors to recover," Lutts said. "The stock market has digested an awful lot of the negative aspects of this, but it's not like one plan is announced and then everything becomes rosy."

He said that this wariness was evidenced Monday by the weakness in bank, homebuilding and mortgage stocks, in particular.

GM (Charts, Fortune 500) shares fell 4 percent after the automaker reported a drop in November sales versus forecasts for a rise, while other auto sales were mixed.

Stocks gained last week after comments from Federal Reserve officials suggested the central bank will cut rates again at its policy-meeting on Dec. 11. But the gains occurred at the end of an unusually rough November on Wall Street in which stocks got slammed on worries that the housing and credit market crisis will push the economy into recession.

Boston Fed president Eric Rosengren said U.S. economic growth will be well below its long-term rate over the next two quarters, according to news reports. Rosengren is a voting member of the Fed's 2007 policy committee. Investors are hoping that Federal Reserve officials, meeting next week, will cut a key short-term interest rate by at least a quarter-point, if not a half-point, so as to speed up the flow of money through the economy.

In economic news, the Institute For Supply Management's manufacturing index for November eased to 50.8 in the month, the group reported, versus forecasts for a slip to 50.5. The index stood at 50.9 in October. Any reading over 50 signifies economic expansion.

Reports are due later in the week on factory orders, consumer sentiment and the big monthly jobs report.

In another sign of the problems in the housing sector, homebuilder Lennar has unloaded 11,000 properties for 40 percent of their value, selling them to a joint venture it set up with the real estate arm of Morgan Stanley. Shares ofLennar (Charts, Fortune 500) ended higher, while Morgan Stanley (Charts, Fortune 500) shares slipped.

On the deal front, Vivendi said Sunday that it plans to buy a big stake in Activision and combine it with Vivendi Games to create a rival company to current leader Electronic Arts (Charts). Shares of video game maker Activision (Charts) rallied nearly 13 percent Monday on the news.

In other deals news, Warren Buffett's Berkshire Hathaway (Charts) reportedly bought $2 billion in bonds at the end of last week, issued by power company TXU.

E*Trade Financial (Charts) slumped 10 percent after Banc of America Securities downgraded the company to "sell" from "neutral" and cut its price target, Briefing.com reported.

Dell (Charts, Fortune 500) shares slid for a second session after the company's quarterly earnings report disappointed investors.

Research in Motion (Charts) shares tumbled after a Morgan Keegan analyst downgraded the Blackberry Maker's stock to "market perform" from "outperform."

Market breadth was negative. On the New York Stock Exchange, losers beat winners by nine to seven on volume of 1.33 billion shares. On the Nasdaq, decliners beat advancers by two to one on volume of 2.01 billion shares.

Treasury prices rose, lowering the yield on the 10-year note to 3.85 percent from 3.94 percent late Friday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar slipped versus the euro and the yen.

U.S. light crude oil for January delivery rose 60 cents to settle at $89.31 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery rose $5.60 to settle at $794.70 an ounce.