Stocks slide on credit woes

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NEW YORK (CNNMoney.com) -- Stocks slipped Thursday morning after MBIA's big quarterly loss exacerbated worries that the fallout for bond insurers could be the next leg of the credit market crisis.

The Dow Jones industrial average (INDU), the broader Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) all declined in the early going.

Stocks ended lower Wednesday, erasing gains sparked by the Federal Reserve's decision to cut the fed funds rate, a key short-term interest rate, by a half-percentage point. It was the second rate cut in a little over a week, with the central bank attempting to give support to the slowing economy and keep money flowing through the system.

The advance had lost steam on market rumors that one of the major bond insurers was likely to be downgraded. It was announced later that Fitch had cut privately-owned bond insurer FGIC Group's financial strength rating.

Lowering an insurer's rating makes it harder for the company to get new business, potentially weakens the value of hundreds of billions of dollars in bonds and adds a strain of uncertainty to already shaky financial markets. (Full story).

Adding to the worries, MBIA (MBI), one of the largest bond insurers, reported a steep quarterly loss Thursday morning, sending shares lower. Competitor Ambac Financial (ABK) slipped too.

Investors also eyed a surprise jump in weekly jobless claims ahead of Friday's more closely-watched Jan. employment report. In other economic news, Dec. personal income and spending both rose more than expected, while the report's inflation component rose 0.2 percent, in line with forecasts.

Earnings. After the close Wednesday, Amazon.com (AMZN, Fortune 500) reported higher quarterly earnings that met estimates on higher revenue that topped estimates. The company also forecast slower operating margins in 2008, and that sent the stock lower on Thursday.

Also late Wednesday, Starbucks (SBUX, Fortune 500) reported higher quarterly profit that topped estimates, but also said that it will open less new U.S. stores in 2008 and close some underperforming ones amid the consumer spending slowdown. Shares slipped Thursday. (Full story).

Other markets. Treasury prices rallied, lowering the yield on the 10-year note to 3.58% from 3.68% late Wednesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the yen and the euro.

U.S. light crude oil for March delivery fell $2.23 to $90.10 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell 80 cents to $925.50 an ounce.