NEW YORK (MarketWatch) -- U.S. stocks on Friday lapsed back into the cellar to close with weekly losses after a late-day burst into positive turf that followed reports that Federal Reserve Chairman Ben Bernanke offered the central bank's discount window to battered mortgage lenders Fannie Mae and Freddie Mac.

"The biggest culprits are bouncing off their lows. It amounts to throwing a deck chair off the Titanic obviously," said Art Hogan, chief market strategist at Jefferies & Co.

Off its earlier lows that had the Dow Jones Industrial Average DJIA, -0.47% dropping below the 11,000 level for the first time since August 2006, the blue-chip index settled at 11,100.54, down 128.48 points, or 1.1%.

For the week, the Dow lost 1.6%.

Of the Dow's 30 components, 21 settled lower, with Chevron Corp. CVX, -2.74% fronting the declines, off 4.2%.

The spiking price of crude also weighed, with tensions between Iran and the West and worries about supply sending futures to an all-time high above $147 a barrel in electronic trade on Globex. On the New York Mercantile Exchange, crude closed up $3.43, at $145.08. Read Futures Movers.

Of reports that Bernanke had offered use of the discount window to the government-sponsored entities, Hogan said: "that would be the logical follow-through to (Treasury Secretary Hank) Paulson saying we're going to give them access to capital. But they still have a trillion dollars of exposure to mortgages they guaranteed."

Investors were especially leery about the ailing financial sector with second-quarter results on tap next week from big institutions including Merrill Lynch & Co. MER, +27.69% and J.P. Morgan Chase & Co. JPM, -0.84%

Shares of Dow component General Electric Co. GE, -1.29% tilted slightly higher after the conglomerate affirmed its 2008 outlook and reported results that met forecasts. The Dow component also said that it would sell its Japanese consumer-lending unit for $5.4 billion. Read full story.

"GE got us ready for what we're going to be listening to: in-line number, lackluster guidance. Other than with financials next week, we get no guidance and have no idea where we're going," said Hogan.

General Motors Corp. GM, -2.37% led the minority gains among the blue chips, with the shares of the automaker up 2.4%.

The S&P 500 Index SPX, -0.48% dropped 13.89 points, or 1.1%, to 1,239.50, giving it a weekly loss of 1.8% from last week's finish.

Of the S&P's 10 industry groups, all fell, with the bloodletting fronted by financials, off 2.5%.

The Nasdaq Composite Index COMP, -0.29% skidded 18.77 points, or 0.8%, to 2,239.08, giving the technology-laden index a 0.3% weekly loss.

Volume on the New York Stock Exchange topped 1.7 billion, and decliners topped advancers more than 2 to 1. On the Nasdaq, more than 1 billion shares traded, and decliners edged just ahead of advancing issues.

Fault lines

In a short statement early Friday, Paulson said that the government was committed to supporting Fannie and Freddie in "their current form."

Fannie Mae FNM, +0.85% and Freddie Mac FRE, -0.64% , the biggest buyers of U.S. home loans, both tumbled at the start and remained down in the wake of Paulson's comments. The mortgage giants' shares fell, with Fannie down 22% and Freddie off 3.1%. Read more.

“ 'Will they change the name of the stadium in St. Louis to Stella? ” — Art Hogan, Jefferies & Co.

Shares of Lehman Brothers were also hit hard, losing 16.6% on the day, as the financial sector at large came under pressure. Read Financial Stocks.

"The only friendly thing I can find to say is InBev (000379310) is raising its bid for Anheuser-Busch Cos. BUD, -0.18% , " said Hogan of reports that the Budweiser brewer is in talks to be acquired by the Belgian firm. See full story.

"Will they change the name of the stadium in St. Louis to Stella?" he quipped.

Also pressuring the equities market was Labor Department data earlier that showed the price of goods imported into the country climbing more than expected in June, as soaring fuel costs and a drop in the dollar combined to drive up the cost of non-U.S.-made products. See Economic Report.

In a separate report, the Commerce Department said that the nation's trade gap narrowed, with U.S. exports increasing at a more rapid pace than imports during May. See full story.

Overseas, Asia markets traded mixed, with the Nikkei 225 Average registering a slight loss in Tokyo but the Hang Seng benchmark advancing 1.7% in Hong Kong. Read Asia Markets.