Updated from 1:28 p.m. EST with new stock prices

A mixed bag of news left financial stocks little changed Thursday morning before the sector began to lose its strength later in the day, but some stocks -- such as

Morgan Stanley

(MS) - Get Report

-- were shoring up gains following Wednesday's devastating selloff.

Morgan announced that the value of its subprime-related exposures had dropped by $3.7 billion pretax since the beginning of its fiscal third quarter, and a few analysts cut their price targets on the firm in response. But shares found relief seeing as that figure is below the midpoint of a range from two analysts cited by

The Wall Street Journal

yesterday.

Those analysts -- from Fox-Pitt, Kelton and Deutsche Bank -- had pegged the number at $3 billion to $6 billion, according to the

Journal

. After taxes, said Morgan, the writedown should shrink fourth-quarter income by about $2.5 billion. Shares were tacking on 4.8% at $53.68 to recoup some of yesterday's substantial losses.

Elsewhere in positive territory, Bermuda insurer

Assured Guaranty

(AGO) - Get Report

jumped 3% to $19.00 after saying it will repurchase up to 2 million of its shares, having completed its prior million-share authorization in the third quarter, and

Wells Fargo

(WFC) - Get Report

added another 75 million shares to its buyback program. Shares of the San Francisco bank ticked up 2.3% to $31.48.

Wells Fargo's gain lent support to the KBW Bank Index, and all of the above stocks are components of the

NYSE

Financial Sector Index, and the trackers climbed 1.2% and 0.2%, respectively.

Helping to weigh down the NYSE financial index, though, was insurance behemoth

American International Group

(AIG) - Get Report

. The New York firm said adjusted income

fell 13.2% from last year to $3.49 billion, or $1.35 a share -- far below the average analyst estimate for $1.62 a share, as per Thomson Financial. Shares slid 3.3% to $56.00.

In negative analyst calls, Lehman Brothers cut Bermuda insurer

Primus Guaranty

(PRS) - Get Report

to underweight, and Dutch bank

ING Group

(ING) - Get Report

got a Bear Stearns downgrade to peer perform from outperform. Shares of the firms were losing 13.2% and 0.9%, respectively.

And

Merrill Lynch

(MER)

was on another downturn after disclosing in its quarterly filing that

Securities and Exchange Commission

staff "initiated an inquiry into matters related to Merrill Lynch's subprime mortgage portfolio" a couple of weeks ago. The broker's exposure to such investments pressured it into a

huge third-quarter loss, as it recently reported, and ultimately led to the

ouster of CEO Stanley O'Neal.