Wall Street ended a whipsaw day mostly lower today, as fears of escalating instability in the financial sector kept investors on edge despite a steep retreat in oil. The Dow Jones industrials had their first close below 11,000 since July 2006.

Just days after the government said it would aid Fannie Mae and Freddie Mac if necessary, the Federal Reserve Chairman, Ben Bernanke, told Congress the American economy faces “numerous difficulties.” During the day’s testimony, the Treasury Secretary, Henry Paulson, also said the Bush administration has no immediate plans to lend money to the mortgage giants or buy their stock.

Shares of Fannie and Freddie — which together hold or back nearly half of all the nation’s mortgages — tumbled again.

The stock market did benefit from some bargain-hunting as oil retreated from its near-record levels, but the uncertainty of the financial sector made that recovery hard to sustain. If oil prices stabilize or retreat, consumers might feel more comfortable spending on discretionary items, and in turn help the economy.

“There’s definitely a correlation between high energy prices and low consumer spending, and we need that to abate to get us a break,”an equity research analyst at Fort Pitt Capital Group, Kim Caughey, said.

A barrel of light, sweet crude dropped $6.44 to settle at $138.74 on the New York Mercantile Exchange as traders bet that the weak economy in America and elsewhere will take its toll on global demand.

While some of the market’s most battered bank stocks — including Washington Mutual Inc., Lehman Brothers Holdings Inc., and regional bank First Horizon National Corp. — finished higher today, most bank stocks gave up their brief rallies by the end of the session.

According to preliminary calculations, the Dow fell 92.65, or 0.84%, to 10,962.54, Broader stock indicators ended mixed. The Standard & Poor’s 500 index fell 13.39, or 1.09%, to 1,214.91, while the Nasdaq composite index rose 2.84, or 0.13%, to 2,215.71.