Stocks fell in heavy trading Wednesday, despite the second aggressive cut in interest rates in nine days by the Federal Reserve.
Traders cited fears of another round of multibillion-dollar losses at major banks and financial institutions that hold subprime debt-related securities.
Late Wednesday, Fitch Ratings, a credit rating agency, withdrew its triple-A rating on Financial Guaranty Insurance, a unit of FGIC Corp. that insures such securities.
The move prompted speculation that similar actions toward other bond insurers would precipitate immediate losses among major Wall Street banks.
Bond insurer Ambac Financial Group sank $2.08, or 16 percent, to $10.85, and rival MBIA fell $2.02, or nearly 13 percent, to $13.96, in the wake of the Fitch rating cut. MBIA is scheduled to report quarterly results Thursday.
The Dow Jones industrial average, which had gained more than 200 points soon after the Fed’s rate cut, lost 37.47, to 12,442.83.
Drug giant Merck closed down $1.32, or 2.7 percent, at $46.69, after the company posted disappointing fourth-quarter results. Merck said it lost $1.63 billion in the quarter and trimmed its earning-per-share outlook for 2008.
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The Standard & Poor’s 500 index slipped 6.49, to 1355.81. The Nasdaq composite index edged down 9.06, to 2349. The Russell 2000 index of small-company stocks lost 9.71, to 695.49.
Treasury securities were mixed, with long-term notes and bonds losing ground and short-term securities moving higher after the Fed rate cut.
The Treasury disclosed details of its plan to sell $22 billion in coupon-bearing securities next week. The government will sell $13 billion of 10-year notes Wednesday and $9 billion in 30-year bonds Thursday.
Crude oil for March delivery rose 69 cents a barrel, to $92.33.