A street sign is seen on Wall Street outside the New York Stock Exchange December 5. - File

Stocks skidded lower Thursday after a regional Federal Reserve report showed a sharp decline in manufacturing activity and as investors grew concerned that downgrades of key bond insurers could trigger further trouble with souring debt.

Each of the major indexes was off by up to 2.0 per cent, including the Dow Jones industrial average, which fell more than 300 points.

Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 from a revised reading of negative 1.6 in December.

Came in short

The reading came in well short of what Wall Street had been expecting and underscored the seriousness of the economic concerns that have gripped both Wall Street and Washington in recent weeks.

Credit concerns also dogged Wall Street after rating agency Moody's Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade.

That possibility alarmed Wall Street because it would place all bonds insured by Ambac on review as well. Ratings agencies are concerned that bond insurers would be unable to absorb a spike in claims.

In the final half hour of trading, the Dow, which had been up more than 50 points early in the session, fell 306.79, or 2.46 per cent, to 12,159.37.

Broader stock indicators also lost ground.

The Standard & Poor's 500 index fell 38.99, or 2.84 per cent, to 1,334.21, and the Nasdaq composite index declined 43.22, or 1.80 per cent, to 2,351.37.

Declining issues outnumbered advancers by about five to one on the New York Stock Exchange, where volume came to 1.72 billion shares.

- AP