Rumors Crush Countrywide

Updated from 1:49 p.m. EST

Countrywide Financial's(CFC) shares plummeted to new lows Tuesday amid rumors -- later denied -- that the mortgage lender could be nearing a bankruptcy filing.

The beleaguered company's stock closed down 28.3% to $5.43, a new 52-week low. Shares dipped as much as 34% to $5.05 in Tuesday trading -- even after a brief trading halt on the New York Stock Exchange and the company issued a statement denying the rumors Tuesday afternoon -- challenging the notion that the nation's largest mortgage lender is too big to fail.

"The rumor was they would file for Chapter 11 this week," Michael Mainwald, head of equity trading at Lek Securities Corp., told Bloomberg during Tuesday afternoon trading.

A call to a spokesman at Countrywide was not returned.

Shares of Countrywide, run by CEO Angelo Mozilo, have lost nearly 90% of their value since last year due to the collapse of the mortgage market.

Other financial stocks also were swooning on a day that uncertainty about the U.S.'s economy continued and another high-profile CEO, Bear Stearns'(BSC) James Cayne, appeared on the way out after drawing fire in the fallout of the subprime mortgage mess. Bear shares were off more almost 7% and shares of JPMorgan Chase(JPM), Merrill Lynch(MER), Morgan Stanley(MS), Lehman Brothers(LEH) and Citigroup(C) were all off more than 3.7%.

Countrywide last year scored $2 billion in funds from Bank of America(BAC) that was meant to prop up the troubled lender, but the funds have done little to stave of losses at the Calabasas, Calif-based company -- and so far has been a losing investment for BofA.