GLOBAL MARKETS-U.S. stocks down on oil, credit fears

                                
(Recasts with U.S. markets, changes dateline; previous LONDON)
                                
 * Oil firms after Iran missile testing
                                
 * Fears of further credit losses sends Wall Street lower
                                
 * Wednesday's oil price boosts global equities
                                
 By Jennifer Ablan
                                
 NEW YORK, July 9 (Reuters) - Wall Street edged lower on
Wednesday as the dramatic oil price decline that bolstered
stocks the prior session was replaced by a firming of crude
prices and credit worries again weighed on investor sentiment.
                                
 After a two-day slide that shaved $9 from the price of a
barrel, U.S. crude held steady as Iran concerns lent support.
                                
 U.S. light crude <CLc1> rose slightly to about $1.00 on the
day, but its price of just over $137 a barrel is a far cry from
last Thursday's record high of $145.85.
                                
 Stocks derived support from the stronger-than-expected
results posted late Tuesday by U.S. aluminum producer Alcoa
<AA.N>, the first major company to report its results for the
earnings season. As a result, equities overseas rallied.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
was up 1.72 percent and Japan's Nikkei average <.N225> closed
up 0.15 percent.
                                
 Oil prices steadied early in the session after Iran tested
long- and medium-range missiles. Iran's test-firing of
missiles, including one which it has previously said could
reach Israel and U.S. bases in the region according to state
media, weighed on the dollar and triggered a bounce in oil.
                                
 But U.S. stocks dropped not only on higher crude oil but
ongoing credit concerns in the financial sector.
                                
 Shares of Fannie Mae <FNM.N> and Freddie Mac <FRE.N> fell
on fresh fears the two housing finance companies will need to
raise billions of dollars of new capital through share sales,
diluting the holdings of current investors.
                                
 Earlier this week, concern that a proposed accounting rule
would require the companies to raise billions in capital added
to investor jitters over whether the government-sponsored
enterprises can withstand more losses and support housing.
                                
 Freddie Mac shares fell 10.5 percent to $12.04. Fannie Mae
shares were down 4.9 percent at $16.76.
                                
 Merrill Lynch <MER.N> was down nearly 4 percent. Analysts
are forecasting that the investment bank will take up to
another $6 billion of write-downs when it reports second
quarter results next week, which could force the bank to raise
additional capital.
                                
 "Equities have become a slave to one commodity -- oil --
and all these credit concerns do not help matters either," said
Brian Gendreau, a New York-based investment strategist at ING
Investment Management Americas, which recently went "neutral"
on U.S. stocks.
                                
 The Dow Jones industrial average <.DJI> was down 28.50
points, or 0.25 percent, at 11,355.71. The Standard & Poor's
500 Index <.SPX> was down 2.10 points, or 0.16 percent, at
1,271.60. The Nasdaq Composite Index <.IXIC> was down 11.63
points, or 0.51 percent, at 2,282.81.
                                
 But bonds fared a tad better.
                                
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
1/32, with the yield at 3.8822 percent. The 2-year U.S.
Treasury note <US2YT=RR> was up /32, with the yield at 2.4788
percent. The 30-year U.S. Treasury bond <US30YT=RR> was down
2/32, with the yield at 4.4579 percent.
                                
In currencies, the dollar was down against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
down 0.44 percent at 72.63 from a previous session close of
72.949.
                                
But tracking European equities, the euro <EUR=> was up 0.43
percent at $1.5738 from a previous session close of $1.5671.
                                
 Against the Japanese yen, the dollar <JPY=> was down 0.28
percent at 107.13 from a previous session close of 107.43.
                                
 COMMODITIES STILL SHINING
                                
 In energy and commodities prices, U.S. light sweet crude
oil <CLc1> rose 78 cents, or 0.57 percent, to  $136.82 per
barrel, and spot gold prices <XAU=> rose $5.75, or 0.63
percent, to  $925.25.
                                
 Meanwhile, the Reuters/Jefferies CRB Index <.CRB> was up
0.85 points, or 0.19 percent, at 448.90.
                                
 The party might be over, however. In a research report on
Wednesday, Merrill Lynch's chief investment strategist, Richard
Bernstein, said: "We still believe that commodities may prove
to be riskier than other asset classes if the global economy
continues to slow."
                                
 (Additional reporting by Al Yoon in New York and Matthew
Robinson and Jeremy Gaunt in London; Editing by Richard
Satran)