Business World

NEW YORK — Stocks fell for the first time this week on Wednesday as concern that bond insurers guaranteeing $2.4 trillion in securities will lose AAA credit ratings erased a rally spurred by the Federal Reserve’s half-point interest-rate cut.

Ambac Financial Group Inc. and MBIA Inc., the largest U.S. bond guarantors, led declines after Fitch Ratings revoked its top ranking on Financial Guaranty Insurance Co. The Standard & Poor’s 500 index had climbed as much as 1.7 percent after the Fed’s decision to lower its benchmark lending rate to 3 percent from 3.5 percent.

The S&P 500 retreated 6.49, or 0.5 percent, to 1,355.81 and is down 7.7 percent this year. The Dow Jones industrial average lost 37.47, or 0.3 percent, to 12,442.83. The Nasdaq composite index fell 9.06, or 0.4 percent, to 2,349.

An analyst’s report forecasting $70 billion of losses for banks should bond insurers face debt downgrades helped extend the S&P 500’s worst monthly decline in five years.
Ambac tumbled $2.08, or 16 percent, to $10.85. MBIA declined $2.02, or 13 percent, to $13.96.

Citigroup Inc., the largest U.S. bank by assets, gave up an advance of as much as 4.4 percent to close down 3 cents at $27.88. JPMorgan Chase & Co., Morgan Stanley and Merrill Lynch & Co. also erased rallies.

Financial Guaranty, a unit of New York-based FGIC Corp., was cut two levels to AA, jeopardizing ratings on securities the insurer guarantees and limiting the company’s ability to generate new business.

Oppenheimer & Co cash advance. analyst Meredith Whitney said banks may write down an additional $70 billion if bond insurers lose their top credit ratings. Whitney downgraded Merrill to "underperform" from "perform" and said it could face writedowns of as much as $10 billion.

Merrill Chief Executive John Thain said the firm’s potential maximum losses from bond insurers are only $3.5 billion.

Financial shares may slide again today. S&P said after the market’s close that it lowered or may cut ratings on $534 billion of residential mortgage securities and collateralized debt obligations.

Profits excluding some items at the 239 companies in the S&P 500 that reported quarterly results so far have declined 33 percent on average.

Baker Hughes Inc. dropped $6.17 to $67.27. The world’s third-largest oilfield-services provider reported a smaller-than-estimated 23 percent increase in profit as drilling for natural gas in North America slowed.

Sprint Nextel Corp. fell 44 cents to $10.36. Clearwire Corp. lost $2.85 to $12.49.

Merck & Co. declined $1.32 to $46.69.

Centex Corp. fell $2.60 to $26.40. The second-largest U.S. house builder posted a net loss of $7.94 a share in its fiscal third quarter.

Boeing Co. climbed $1.91, or 2.4 percent, to $82.87 for the top gain in the Dow average.

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