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) and Radian ( RDN) respectively fell 15.3% and 8.2%.

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) 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). 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) took a 23.7% dive to $2.41.

Amid today's depressed mood, even upgraded firms like Arthur J. Gallagher ( AJG), an insurance broker, and Federated Investors ( FII), 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) gained 1% to $51.92; and exchange IntercontinentalExchange ( ICE) was up 0.6% to $165.10.

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