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For financial stocks on Tuesday, a mildly hopeful start quickly gave way to another steep slide as damaging Countrywide( CFC) rumors combined with yet more trappings of credit-market woes.

On the heels of a crushing year for the nation's biggest mortgage lender, Countrywide shares plummeted 28.4% in furious trading after speculation swirled that it would soon

file for bankruptcy. Countrywide's denial of the rumors briefly provided a modicum of relief, but that was short-lived as shares dropped below the harrowing morning levels. They finished $2.17 lower at $5.47.

Fellow mortgage concerns followed suit: mortgage investors

Freddie Mac

( FRE) and

Fannie Mae

( FNM) were down 8.2% and 7.8%, respectively; mortgage lender

IndyMac Bancorp

( IMB) lost 10.4%; and mortgage insurers

MGIC Investment

(MTG) - Get MGIC Investment Corporation Report

and

Radian

(RDN) - Get Radian Group Inc. Report

respectively fell 15.3% and 8.2%.

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New York broker

Bear Stearns

( BSC) -- which, thanks to the credit crunch, has also had a rough few months -- saw shares drip steadily lower today after

The Wall Street Journal

reported that CEO James Cayne will

step down from that position while staying on as chairman of the board.

That would make Cayne the latest in a line of financial services executives who have been pushed out in the wake of miserable results from heavy exposure to the imploding mortgage market. Other noteworthy ousters include

Chuck Prince from

Citigroup

(C) - Get Citigroup Inc. Report

and

Stan O'Neil from

Merrill Lynch

( MER).

Bear shares surrendered $5.08, or 6.7%, to $71.17.

Among the biggest decliners today, meanwhile, were bond insurers

Ambac

( ABK) and

MBIA

(MBI) - Get MBIA Inc. Report

. Morgan Stanley slashed bottom-line estimates for the fourth quarter and 2008 on concerns that the companies are being strained ever harder by the roiled credit markets, according to

Marketwatch

. Ambac plunged 16.7% to $19.56, MBIA lost 20.7% to $13.98, and fellow bond insurer

Security Capital Assurance

(SCA) - Get Stellus Capital Investment Corp 5.75 % Notes 2017-15.09.22 Report

took a 23.7% dive to $2.41.

Amid today's depressed mood, even upgraded firms like

Arthur J. Gallagher

(AJG) - Get Arthur J. Gallagher & Co. Report

, an insurance broker, and

Federated Investors

(FII) - Get Federated Investors, Inc. Class B Report

, an investment manager, ended to the downside. Each was raised to buy from neutral -- the former at Merrill Lynch, on valuation and an attractive dividend, and the latter at UBS -- but after a day spent mostly in the green, they each finished slightly down at $23.45 and $38.96, respectively.

The

NYSE

Financial Sector Index plunged 212.54, or 2.7%, to 7,701.52, and the KBW Bank Index took a 4% free fall to 80.59.

Among those few financial stocks closing higher, futures-and-options broker

MF Global

( MF) added 1.9% to $28.92;

Reinsurance Group of America

(RGA) - Get Reinsurance Group of America, Incorporated Report

gained 1% to $51.92; and exchange

IntercontinentalExchange

(ICE) - Get Intercontinental Exchange, Inc. Report

was up 0.6% to $165.10.