US STOCKS-Fannie Mae, Freddie Mac worry sinks Wall St

(Updates with market extending losses)

NEW YORK, Aug 18 (Reuters) - U.S. stocks extended losses on Monday as shares of home finance companies Fannie Mae(FNM.N) and Freddie Mac (FRE.N) slid further on concerns about the prospect of more fallout from the U.S. housing slump.

Both stocks contributed to a broad sell-off in financial shares.

The market took a turn for the worse as the U.S. Treasury repeated that it has no plans to use its new authority to backstop the mortgage finance giants by providing them with equity capital or new loans. For details, see [ID:nWAT009920]

The Treasury comments followed a Barron's newspaper report over the weekend that said the U.S. Treasury was increasingly likely to recapitalize the beleaguered companies, a move that will potentially dilute the value of stock holdings.

The Dow Jones industrial average .DJI slid 122.05 points, or 1.05 percent, to 11,537.85. The Standard & Poor's 500 Index .SPX declined 11.52 points, or 0.89 percent, to 1,286.68. The Nasdaq Composite Index .IXIC dropped 21.12 points, or 0.86 percent, to 2,431.40. (Reporting by Ellis Mnyandu; Editing by Jan Paschal)