MBIA

(MBI) - Get Report

led a financial stock rally on Thursday after the bond insurer entered a $200 billion reinsurance deal with FGIC Corp. MBIA gained more than 24% in recent trading to $14.90.

Other insurers followed suit, with

Ambac

( ABK) up almost 16% to $6.07;

MGIC

(MTG) - Get Report

up 13.4% to $7.97; and

PMI Group

( PMI) gaining 5.2% to $3.04.

MBIA will receive $741 million in premiums to reinsure municipal bonds for FGIC's Financial Guaranty Insurance business. The deal was welcome news for MBIA, which lost its "AAA" ratings this month, and FGIC, whose bond ratings recently dropped to "junk" status. Bond insurers have posted losses and suffered sharp declines in market value this year as the credit markets seized up and the assets they insure lost significant value.

Other financial stocks also performed well, as the market rose following positive reports on gross domestic product and jobless claims. The NYSE Financial Sector Index gained almost 150 points, or 2.4%, in recent trading, and the KBW Bank Index rose 1.5%. The

Dow Jones Industrial Average

was up more than 180 points, or 1.6%.

Government-supported mortgage buyers

Fannie Mae

( FNM) and

Freddie Mac

( FRE) continued their streak of double-digit gains the day after Fannie outlined a

management shake-up and analysts continued to express

positive sentiment about their capital position.

Elsewhere in the sector,

CME Group

(CME) - Get Report

gained 4.3% to $344.58 after reporting finalized terms of its cash-versus-stock payout for its acquisition of

Nymex Holdings

( NMX). About 61% of Nymex investors will receive $7.29 in cash and a bit more than a fifth of a CME share for each share of Nymex. The rest will receive $81.16 in cash, with CME's full cash payout totaling $3.4 billion.

Goldman Sachs

(GS) - Get Report

,

Lehman Brothers

( LEH) and

Morgan Stanley

(MS) - Get Report

all rose, despite two analysts predicting significant writedowns for the firms in the upcoming quarter.

Goldman recently gained 3.3% to $160.61, Lehman added 3.3% to $15.26, and Morgan Stanley rose 2.8% to $40.16. KBW analyst Lauren Smith lowered estimates for all three companies, citing mortgage and other asset writedowns, weaker investment banking revenue and lower trading revenues. Fox-Pitt analyst David Trone estimated $6.1 billion in writedowns for the three firms on devalued assets, warning that the weakness is "not going away anytime soon."