S&P 500 Leaders & Laggards: Ambac, WaMu

The S&P dipped 3.32 points to 1,358.44 on the day.

Ambac shares lost 24 cents, or 11.4 percent, to $1.87, and touched a low of $1.74. The stock has plunged 28.6 percent over the last three sessions, since Standard & Poor's Ratings Services cut the financial strength rating of Ambac and fellow bond insurer MBIA Inc.

Shares of Lehman Brothers Holdings Inc. dropped $1.98, or 6.7 percent, to $27.50. Lehman stock shed 8.7 percent of its value Monday after the bank forecast a large second-quarter loss and said it had sold $6 billion in stock to raise funds.

Chip maker Nvidia Corp. fell for the third straight session, declining $1.41, or 6 percent, to $22.28 after an analyst downgrade. The stock is down 10.3 percent since the end of trading on Thursday.

On the positive side, shares of Washington Mutual Inc. recovered a bit from a sharp drop Monday to gain 43 cents, or 6.9 percent, to $6.68. The commercial bank's stock reached an 16-year low of $6.01 early in the session.

Pall Corp. stock added $1.90, or 4.7 percent, to $41.72. Late Monday, the filter and purifier maker posted a larger adjusted profit and stronger sales in its fiscal third quarter. Revenue from the life science and industrial segments increased, and currency exchanges also boosted Pall's profit.

Bond insurer XL Capital Ltd. gained $1.51, or 4.7 percent, to $33.44. The stock fell 7.1 percent over the previous two sessions after Standard & Poor's lowered XL's financial strength rating.