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. 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.
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 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.
The Dow fell 120.90, or 0.94%, to 12,745.88.
Broader stock indicators were also lower a day after the stock market notched a modest advance. The Standard & Poor's 500 index fell 9.40, or 0.67%, to 1,388.28, and the Nasdaq composite index fell 5.72, or 0.23%, to 2,445.52.
For the week, the Dow fell 2.39%, the S&P 500 declined 1.81% and the Nasdaq lost 1.27%.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, stood at 3.78% 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. The deficit stood at $58.2 billion, a decrease of 5.6% from February. The 2.9% drop in demand for imports was the steepest monthly decline since December 2001 — a month after the last recession ended.
Noman Ali, portfolio manager of U.S. equities for MFC Global Investment Management in Toronto, doesn't expect the market will test its March lows and said some of Wall Street's angst over rising oil prices is overdone.
"Our view is still positive on the market. Obviously oil is hurting but I think the consumer fiscal stimulus package is going to help," he said, referring to rebates the U.S. government is now distributing.
He contends the wealthier Americans who account for an outsize%age of U.S. consumer spending won't stop reaching into their wallets because of higher oil prices and that overall spending hold up better than some on Wall Street are predicting.
In corporate news, AIG fell $3.87, or 8.8%, 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% 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%, to $23.63.
General Motors Corp., also a Dow component, fell 86 cents, or 4.1%, to $20.29 after reporting 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.
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%, to $5.07, while Blockbuster slipped 2 cents to $2.66.
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 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%, to 720.05.
Overseas, Japan's stock market fell 2.06%. Britain's FTSE index fell 1.05%, Germany's DAX index fell 0.97%, and France's CAC-40 fell 1.88%.
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The Dow Jones industrial average ended the week down 312.32, or 2.39%, at 12,745.88. The Standard & Poor's 500 index finished down 25.62, or 1.81%, at 1,388.28. The Nasdaq composite index ended the week down 31.47, or 1.27%, at 2,445.52.
The Russell 2000 index finished the week down 5.69, or 0.78%, at 720.05.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended Friday at 14,040.05, down 211.01 points, or 1.48%, for the week. A year ago, the index was at 15,259.58. (AP)
