Updated from 2:42 p.m. EST with new stock prices

Small-cap stocks got hammered worse than the falling major indices Thursday. The Russell 2000 Index was down 0.3% to 769.45, and the S&P SmallCap 600 lost 0.4% to 398.70.

Among the losers was bond insurer

Security Capital Assurance

(SCA) - Get Report

, which issued a response today to Fitch Ratings, which had threatened to downgrade the company from its crucial AAA rating unless it were to raise more than $2 billion in six weeks. Security Capital said it cannot guarantee that it will raise that much in the given timeframe. Shares plummeted 22.4% to $4.23.

Also dropping was

Cell Therapeutics

(CTIC) - Get Report

. The Seattle developer of cancer treatments privately issued $23.3 million in new convertible bonds due 2011, as well as some 5.5 million newly minted shares, to swap for $36.1 million in existing convertible bonds that were to mature next year. Another $19.8 million in bonds, due June 2008, remains outstanding. Cell Therapeutics' stock dropped 20.3% to $2.00.

In a related move,

Network Equipment Technologies

( NWK) continued Wednesday's drop, this time losing 14.6% to $9.13 after pricing its previously announced sale of convertible senior notes. In a private offering, the Fremont, Calif.-based voice and data equipment maker issued $85 million in bonds due 2014, with an option to purchase up to $20 million in additional notes on or before Dec. 28. Notes are equivalent to an initial conversion price of $13.63 per share, and the company expects net proceeds of $82 million from the transaction.

Some stocks did manage to rally despite the gloomy environment. After falling Wednesday on an announcement that it would sell $300 million in stock, Hamilton, Bermuda-based

Assured Guaranty

(AGO) - Get Report

bounced back 16.1% to $24.90 Thursday. After the close last night, Fitch Ratings reaffirmed its AAA rating of the bond insurer, citing a "disciplined underwriting strategy." This morning, Assured announced it would use capital to reinsure $29 billion in policies for ailing fellow insurer

Ambac

( ABK). Shares of Ambac were down 4.1% at $23.84.

Finally,

Amis Holdings

(AMIS)

, a maker of custom semiconductor products, announced

ON Semiconductor

(ONNN)

would buy the Idaho-based company for $915 million in stock. AMIS shareholders are to receive 1.15 shares of ON for every share of AMIS held. Shares of AMIS took off 31.2% to $9.64, while ON was down 3.2% at $8.54.