Stocks decline as AIG reveals need for cash
NEW YORK » Wall Street ended the week with a big decline as investors grappled with two of the biggest threats to the economy: fallout from turmoil in the credit market and surging energy prices. All three major indexes suffered losses for the week.
Insurer American International Group Inc. helped send the Dow Jones industrial average down about 120 points after posting a wider-than-expected first-quarter loss that rekindled anxiety about the strained state of the global financial system.
AIG reported it lost $7.81 billion -- its second straight quarterly loss -- and revealed plans to raise $12.5 billion in the coming months.
Meanwhile, rising crude oil prices remained a source of worry for investors, as they had much of the week and in recent months. Oil futures rose above $126 a barrel for the first time, further stoking Wall Street's concerns about inflation that could curtail consumer spending. Light, sweet crude rose as high as $126.20 on the New York Mercantile Exchange before settling at a record $125.96. For the week, oil jumped nearly $10.
Phil Orlando, chief equity market strategist at Federated Investors, said investors retreated primarily because of the AIG news.
"That news came as something of a surprise to some and a wake-up call to most that the financial-service companies are not yet out of the woods."
But Orlando noted that the market's pullback this week came after a sizable rebound in the last two months.
The Dow fell 120.90, or 0.94 percent, to 12,745.88. The Standard & Poor's 500 index fell 9.40, or 0.67 percent, to 1,388.28, and the Nasdaq composite index fell 5.72, or 0.23 percent, to 2,445.52.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 3.40 billion shares, compared with 3.70 billion traded Thursday. The Russell 2000 index of smaller companies rose 0.50, or 0.07 percent, to 720.05.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, stood at 3.78 percent late Friday, unchanged from late Thursday.
Gold prices advanced, while the dollar traded mixed against other major global currencies.
The economic figures arriving Friday underscored the slowdown in the U.S. economy. The Commerce Department said the U.S. trade deficit narrowed in March as demand for imports registered the biggest decline since the last recession was ending.
In corporate news, AIG fell $3.87, or 8.8 percent, to $40.28 after reporting its loss. The stock was by far the steepest decliner among the 30 that comprise the Dow industrials.
Citigroup Inc. said it hopes to shed between $400 billion and $500 billion in assets and increase revenue by 9 percent over the next few years as it tries to recover from big losses tied to deterioration in the mortgage and credit markets. Citi, one of the Dow 30 stocks, fell 67 cents, or 2.8 percent, to $23.63.
Consumer electronics chain Circuit City Stores Inc. said it received a letter from suitor Blockbuster Inc. that the company's largest shareholder, financier Carl Icahn, is prepared to buy Circuit City even if the video rental chain can't win the necessary financing or shareholder approval.
Circuit City jumped 28 cents, or 5.9 percent, to $5.07, while Blockbuster slipped 2 cents to $2.66.