The financial sector was punished Friday as a host of troubling news about the declining value of debt holdings wreaked havoc on the stocks in the group.
One of the hardest hit was
Dow Jones Industrial Average
American International Group
, who fell 6.6% to $46.86 after the insurance giant reported a more than $5 billion loss for the most recent quarter.
AIG took more than $11 billion of pretax writedowns on its investments and said the head of its financial products business, the unit that took the hit, was resigning.
reported that bond insurer
may have hit a roadblock in the rescue plan that had been developing. The problems involves a dispute with the ratings agencies whose verdict is crucial to Ambac retaining its triple-A debt rating. The agencies are calling for banks to inject more capital into Ambac, given the structure they are proposing for the business.
Shares of Ambac slid 5.6% to $11.14.
Ambac's cohort in the mortgage meltdown also suffered.
said in a filing that continued deterioration in the credit markets in January will likely lead to further writedowns. The stock sank 7.8% to $12.97.
Also taking a blow was insurance company
National Financial Partners
, which was downgraded by Keefe Bruyette from outperform to marketperform, and the stock spiraled down 15.7% to $23.77.
was another loser, falling breaking down 17.2% to $17.55, a 52-week low.
Credit rating agency Standard & Poor's cut its long-term rating to triple-B from BBB+, because of a $141.5 million loss tied to unauthorized trading. It also placed MF Global on negative credit watch, meaning it could be downgraded again. Lehman downgraded MF shares to equal-weight from overweight and cut it price target to $21 from $36.
Investment banks tumbled after estimates were slashed by UBS and Punk Ziegel. UBS cut its fiscal first-quarter earnings estimate on
to $1.25 a share from $1.87, helping send the stock down 5.2% to $79.86.
profit estimate was cut to $2.50 a share from $4, causing the stock to drop 4% to $169.63.
shares fell 6.8% to $50.99,
dropped 5.1% to $42.12, and
slid 4.1% to $49.56, all after getting cut.
Punk Ziegel's also took actions on Goldman Sachs, Merrill Lynch and
. Citi dropped 5.2% to $23.71.
Reflecting the overall malaise, the
Financial Sector index was down nearly 280 points, or 3.7%, to 7343.
One of the few winners of the day was
which climbed 12.6% to $25.65 after Wilbur Ross agreed to invest as much as $1 billion in the bond insurer. Ross is seeking to capitalize on the strength of Bermuda- based Assured Guaranty, one of two bond insurers whose credit ratings weren't threatened with a downgrade in the past three months.