NEW YORK (CNNMoney.com) -- Stocks looked set for a rough open Thursday as investors battled concerns about troubled bond insurers and shrugged off another Federal Reserve rate cut.
Less than three hours before the market open, Nasdaq and S&P futures were lower, indicating a weak start for stocks.
Just after midnight Thursday, bond insurer MBIA (MBI) reported its fourth-quarter results, posting a net loss of $2.3 billion that was far worse than forecasts. The loss was due primarily to a $3.5 billion writedown on its portfolio of insured credit derivatives. Its report followed an announcement late Wednesday night that it had received a $500 million infusion from private-equity firm Warburg Pincus. Shares of MBIA were sharply lower in early Frankfurt trading.
Bond insurers have been hit hard by the subprime crisis after insuring securities backed by mortgages and other loans made to borrowers with weak credit.
Fears that companies like Ambac (ABK) and MBIA could get downgraded by ratings agencies sparked a bout of selling late Wednesday, because losing their AAA credit ratings could cripple their businesses.
The firms have wide influence on the broader markets, guaranteeing more than $2 trillion in debt. There are some reports that Wall Street could be hit with as much as $40 billion in additional writedowns if the insurers are downgraded.
Stocks, which had rallied after the Fed cut rates by another half point Wednesday, turned around and finished the session lower on concerns about the insurers.
Investors will get another rash of economic readings Thursday, including one on personal income and spending from the Commerce Department, along with a look at the fourth-quarter employment cost index and weekly initial jobless claims from the Labor Department.
Investors are also likely looking ahead to Friday's much anticipated January employment report, which is forecast to show a modest net gain of only 65,000 jobs on U.S. payrolls, with unemployment expected to remain at 5 percent.
After the bell Wednesday, online retailer Amazon (AMZN, Fortune 500) reported earnings that beat analysts' expectations, thanks to a strong holiday shopping season. But shares of Amazon fell 12 percent in after-hours trading as it reported thinner-than-expected profit margins.
Starbucks (SBUX, Fortune 500) shares slipped 1 percent in after-hours trading Wednesday after it announced it would trim the number of new stores it plans to open this year and close some U.S. locations. It also cut its first-quarter earnings guidance.
Drugmaker Eli Lilly (LLY, Fortune 500) is in advanced settlement talks with federal investigators as it tries to head off an indictment over its marketing of antipsychotic drug Zyprexa, according to published reports. The reports said the firm could face substantial fines over charges that it failed to warn patients of the drug's potential side effects and marketed it for uses not approved by the FDA.
Investors are looking ahead to earnings due Thursday from drugmakers Bristol-Myers (BMY, Fortune 500) and Wyeth (WYE, Fortune 500) before the open, and Internet bellwether Google (GOOG, Fortune 500) after the market closes.
In global trade, Asian stocks ended the session mixed and European stocks tumbled in morning trading
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