On the whole, financial stocks were performing better than the sinking broad market Tuesday after the Federal Reserve
chopped its key interest rate down by 75 basis points. The NYSE Financial Sector Index mostly straddled the flat line today, though it ended up 0.5% at 7,345.26. The huge rate cut was prompted by worldwide fears of an economic slowdown, which sent overseas markets into a free fall on Monday while Wall Street took a break for Martin Luther King Jr. Day. The move was a particular boon for banks, even as many shuttled through yet another dismal round of earnings reports. Bank of America ( BAC), for instance, climbed 4% to $37.39 even though the Charlotte, N.C. bank said fourth-quarter income dove 94.9% to $268 million, or a nickel a share. Analysts polled by Thomson Financial were seeking a profit of 18 cents a share. Weighing in most significantly was a $5.28 billion writedown on collateralized debt obligations, as well as a mounting credit-loss provision of $1.74 billion. Similarly, shares of Cleveland's National City ( NCC) leapt 6.7% to $15.29 even though a swelling loan-loss provision helped force it into a loss of $333 million, or 53 cents a share, reversing a year-earlier profit of $1.36 a share. Fellow Cleveland bank KeyCorp ( KEY) reported a plummeting continuing-operations profit of $22 million, or 6 cents a share, before the effects of an accounting change, vs. 76-cent EPS a year earlier. And earnings at Birmingham-based Regions Financial ( RF), excluding one-time merger-related charges, fell 61.8% year over year to $164.6 million, or 24 cents a share. But KeyCorp shares jumped $2.65, or 12.6%, to $23.75. Regions stock was up 4.9% at $20.13. The KBW Bank Index surged on the power of all of the above stocks, as well as on most of the sector tracker's other big-bank components. The index flew higher by 2.55 points, or 3.3%, to 80.14. Also lending support was Wachovia ( WB), notwithstanding its relatively paltry fourth-quarter continuing-operations profit of $160 million, or 8 cents a share, excluding merger and restructuring costs. On that basis, a year earlier the Charlotte, N.C., bank had pocketed $2.28 billion, or $1.19 a share. Once again, a credit-loss provision of $1.5 billion is largely to blame. Actual charge-offs came to $500 million for the quarter. But, thanks to the Fed rate cut, shares were riding 3.6% higher to $31.91. And the shattered shares of Ambac Financial ( ABK) recovered to soar 28.6% even after the bond insurer reported an even more egregious fourth-quarter loss than what it had predicted last week. The New York-based firm posted an operating loss of $6.21 a share -- 41 cents more than the prior maximum prediction -- against Wall Street targets for a $3.51 shortfall. On a net basis, meanwhile, the New York-based firm hemorrhaged $3.26 billion, or $31.85 a share. That's essentially in line with last week's $31.83 EPS guidance. A year earlier, the company made $1.88 a share on both a net and operating basis. Ambac shares lost a tremendous amount of value last week after Moody's put it on review for downgrade following the guidance, which came on the heels of a dividend slashing and news that CEO Robert Genader would retire. Simultaneously announced plans to raise $1 billion were canceled two days later, upon which Fitch cut Ambac's rating . Still, its shares were up $1.77 to $7.97 in very modest recovery from last week's devastating losses. MBIA ( MBI), whose shares also lost considerable ground last week on a Moody's rating review, scampered 46.6% higher at $12.53 in substantial recovery. Among the few financial losers Tuesday was American Express ( AXP), which was hit with a Citigroup downgrade to hold from buy. Shares of the credit card company were falling 0.6% to $43.34.