NEW YORK (AP) - Wall Street retreated Friday as investors
contended with two of the biggest threats to the economy: fallout
from turmoil in the credit market and surging energy prices. The
Dow Jones industrial average lost more than 125 points.
Insurer American International Group Inc. rattled investors
after posting a wider-than-expected first-quarter loss, rekindling
investors' anxiety about the strained state of the global financial
system. AIG reported a loss of $7.81 billion - its second straight
quarterly loss - and revealed plans to raise $12.5 billion in the
coming months. The world's largest insurer, like many of its peers
in the financial services sector, has seen its investments in the
credit markets plunge in value.
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.
"I think what we're seeing so far is a reaction principally to
the AIG news," said Phil Orlando, chief equity market strategist
at Federated Investors. "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 has pulled back this week
after a sizable rebound in the last two months and that some
investors might be eager to lock in profits while Wall Street irons
out some concerns about the financial sector.
"Our view has been that the market, generally speaking, is in
pretty good shape with the exception of the financial service
companies and the consumer dictionary companies," he said, noting
that the news from AIG is an important reminder of the troubles
remaining among financials.
In late afternoon trading, the Dow fell 125.22, or 0.97 percent,
to 12,741.56.
Broader stock indicators were also lower a day after the stock
market notched a modest advance. The Standard & Poor's 500 index
fell 9.85, or 0.70 percent, to 1,387.83, and the Nasdaq composite
index fell 8.22, or 0.34 percent, to 2,443.02.
Bond prices rose as investors sought the safety of government
debt. The yield on the benchmark 10-year Treasury note, which moves
opposite its price, fell to 3.76 percent from 3.78 percent 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. The deficit
stood at $58.2 billion, a decrease of 5.6 percent from February.
The 2.9 percent drop in demand for imports was the steepest monthly
decline since December 2001 - a month after the last recession
ended.
In corporate news, AIG fell $3.60, or 8.2 percent, to $40.55
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 about $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,
slipped 66 cents to $23.64.
General Motors Corp., also a Dow component, said in a regulatory
filing it would provide financial support to help settle the
10-week strike at auto parts supplier American Axle and
Manufacturing Holdings Inc. GM fell 76 cents, or 3.6 percent, to
$20.39.
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 34 cents, or 7.1 percent, to $5.13, while
Blockbuster slipped 3 cents to $2.65.
Investors' caution Friday precedes what will likely be a busy
week of economic news now that the flow of quarterly earnings
reports is beginning to ebb.
"Next week I think will be a fairly important economic week,"
Orlando said, pointing to expected reports on retail sales, retail
inventories, industrial production and regional manufacturing.
Declining issues outnumbered advancers by about 3 to 2 on the
New York Stock Exchange, where volume came to 827.6 million shares.
The Russell 2000 index of smaller companies fell 0.67, or 0.09
percent, to 718.88.
Overseas, Japan's stock market fell 2.06 percent. Britain's FTSE
index fell 1.05 percent, Germany's DAX index fell 0.97 percent, and
France's CAC-40 fell 1.88 percent.
On the Net:
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Nasdaq Stock Market: http://www.nasdaq.com
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