( Ambac and other stock prices brought current in this update.) NEW YORK ( TheStreet) -- Ambac Financial ( ABK) shares surged early Tuesday before retracing its gains, making the stock one of the most actively traded in the financial sector Tuesday. Ambac Financial shares rallied as much as 50% earlier in the day, touching a new 52-week high of $3.39 and extending a three-day rally. On Friday, Ambac reported fourth-quarter net income of $558.1 million, or $1.93 a share, which swung from a year-ago loss of $2.34 billion, or $8.14 a share. Results included a $472 million tax benefit.
However, shares of Ambac pulled back and turned lower, falling 21.8% to $1.76, after JPMorgan analyst Andrew Wessel maintained his stance that the common equity "has no value." "We believe any investment in Ambac shares at this time is highly speculative, although we still believe a short in Ambac equity will generate attractive long-term returns," Wessel wrote. "Basically, we feel the near-term volatility may not be worth the eventual long-term pay-off from a short." Still, Ambac's recent strength since the April 8 earnings release was attributed by some to a massive short squeeze. According to the New York Stock Exchange's monthly short interest report, short interest on Ambac Financial increased to 60.4 million shares by the end of March, up from 54.4 million on March 15, making it one of the top 25 short interest candidates on the exchange. In March, Ambac said it may consider a negotiated restructuring of its debt through a prepackaged bankruptcy proceeding or may seek bankruptcy protection without agreement concerning a plan of reorganization with major creditor groups. In addition, the Wisconsin Office of the Commissioner of Insurance (OCI), which regulates Ambac Assurance Corp., took control of $35 billion of its main subsidiary's liabilities. Ambac share volume has easily outpaced the three-month average daily volume over the last three sessions. More than 658 million shares changed hands Tuesday, compared with the average daily volume of 21 million. Fellow bond insurer MBIA ( MBI) lost 4.9% to $7.70, although the stock is up more than 40% over the last month. Elsewhere, several regional bank stocks lost ground after UBS downgraded Regions Financial ( RF), KeyCorp ( KEY), Huntington Bancshares ( HBAN) and TCF Financial ( TCB) to sell from neutral. UBS also cut Commerce Bancshares ( CBSH) to neutral from buy.