By Jonathan Stempel

NEW YORK (Reuters) - Moody's Corp (MCO.N: Quote, Profile, Research) on Thursday said market turmoil has reduced demand for credit ratings and will depress earnings and revenue in 2008, but its 54 percent drop in quarterly profit was smaller than expected.

Shares of the parent of Moody's Investors Service closed up 10.4 percent, rising $3.49 to $37.00, though they remain down 50 percent over the last year.

Relative stability in international operations cushioned a 23 percent drop in U.S. revenue, including declines of 53 percent from rating structured products and 81 percent from rating mortgage securities.

Moody's and rivals such as McGraw-Hill Cos' (MHP.N: Quote, Profile, Research) Standard & Poor's and Fimalac SA's (LBCP.PA: Quote, Profile, Research) Fitch Ratings are suffering from shrinking demand for ratings of mortgage- and asset-backed securities and collateralized debt obligations.

Regulators and investors have faulted the agencies for feeding the U.S. housing boom and subsequent bust by long assigning "triple-A" ratings to many risky securities, only to later downgrade those securities too fast.

"The severity and protracted nature of current credit market dislocations confirms that the challenges of 2007 will persist well into 2008," Moody's Chief Executive Raymond McDaniel said. "It is going to be a challenging year, both inside and outside the U.S."

Billionaire Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research) is Moody's largest investor. Despite Thursday's rise, Berkshire's reported 18.6 percent stake has lost about $1.77 billion in value over the last year.

REVENUE SLIDES