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Stocks drop as subprime worries weigh

NEW YORK (Reuters) - Stocks edged lower on Tuesday as bond yields rose and possible fallout from the subprime mortgage market kept investors on edge.

A 2 percent drop in oil prices dragged down shares of energy companies, with Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) down 0.9 percent at $81.62.

Financial stocks also slipped, with shares of Citigroup Inc. (C.N: Quote, Profile, Research) down 0.8 percent at $51.26.

During the session, stocks remained skittish and swung back and forth from positive to negative.

"Professionals don't like unknowns. Bear Stearns has to come out and quantify the losses," said Elliot Spar, market strategist with Ryan Beck & Co., in New York.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) dropped 14.80 points, or 0.11 percent, to 13,337.25. The Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) was down 4.63 points, or 0.31 percent, at 1,493.11. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was down 7.05 points, or 0.27 percent, at 2,570.03.

The benchmark 10-year U.S. Treasury note was down 3/32, with the yield edging up to 5.10 percent.

Bear Stearns Cos. Inc. (BSC.N: Quote, Profile, Research) on Friday said it would bail out one of two hedge funds it manages that has invested in debt backed by subprime mortgages, raising concerns that additional investment banks, hedge funds and other investors may have to take losses on their portfolios of collateralized debt obligations.

New home sales fell more than expected last month, the government said, while consumer confidence fell in June to a 10-month low.

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