Stocks fell for a third straight session Wednesday after worries about the financial sector and a rise in oil prices offset investors' enthusiasm over an upbeat profit report from Hewlett-Packard Co.

Concerns about the well-being of mortgage financiers Fannie Mae and Freddie Mac again dragged on the financial sector and the broader market. Wall Street is worried that the government-chartered companies will require a bailout, a move that could wipe out shareholders' equity.

H-P's report indicated that some sectors like technology are faring better than the financial stocks that have been pummeled by the credit crisis.

But oil, which has rebounded this week after dropping $35 from its July 11 high of $147.27, continued its rise. A barrel of light, sweet crude rose $1.75 to $116.28 on the New York Mercantile Exchange.

High fuel costs have contributed to recent surges in inflation for businesses and consumers, so investors grew uneasy watching crude regain ground.

In midmorning trading, the Dow Jones industrial average fell 55.86, or 0.49 percent, to 11,292.69. Concerns about inflation and the financial sector led the Dow to post its worst two-day performance since late June on Monday and Tuesday with an overall drop of about 310 points.

Broader stock indicators also fell Wednesday. The Standard & Poor's 500 index slipped 3.34, or 0.26 percent, to 1,263.35, while the Nasdaq composite index fell 2.02, or 0.08 percent, to 2,382.34.

Bond prices rose as stocks fluctuated. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.79 percent from 3.84 percent late Tuesday.

Oil prices continued their advance. While oil is down about $30 from its July 11 high of $147 a barrel, investors have watched crude log gains the past few days. Government reports last week and on Tuesday showed larger-than-expected increases in inflation faced by consumers and companies, raising further concern about the effect of elevated oil prices.

Light, sweet crude rose $1.69 to $116.22 per barrel on the New York Mercantile Exchange. Investors are awaiting weekly government inventory figures due after the start of trading.

The dollar was mixed against other major currencies, while gold prices rose.

In corporate news, Fannie Mae fell $1.09, or 18 percent, to $4.92, while Freddie Mac declined 88 cents, or 21 percent, to $3.29 following published reports about a possible bailout.

H-P rose $1.51, or 3.5 percent, to $45.20 after reporting its better-than-expected results.

Monsanto Co. said it agreed to sell its Posilac brand of cow hormones to drug maker Eli Lilly & Co. for at least $300 million. Monsanto rose $2.26, or 2 percent, to $115.12, while Eli Lilly slipped 29 cents to $47.51.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 127.3 million shares.

The Russell 2000 index of smaller companies fell 0.70 percent, to 0.10 percent, to 729.33.

Overseas, Japan's Nikkei stock average fell 0.10 percent. In afternoon trading, Britain's FTSE 100 rose 0.38 percent, Germany's DAX index advanced 0.33 percent, and France's CAC-40 rose 0.41 percent.

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