Stocks decline as AIG reveals need for cash, oil surges
The Associated Press
By TIM PARADIS
NEW YORK
Fri, 09 May 2008 07:21 MST

Wall Street fell sharply early Friday as investors contended with wider-than-expected losses at insurer American International Group Inc. and another worrisome spike in oil prices. The Dow Jones industrial average at times lost more than 100 points.

AIG's loss for the first quarter rekindled investors' anxiety about the strained state of the global financial system. AIG posted a first-quarter 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, crude oil prices extended their trek into uncharted territory, keeping Wall Street's inflationary concerns alive. Oil futures rose above $126 a barrel for the first time before giving back some of its advance. Light, sweet crude recently rose $1.16 to $124.85 on the New York Mercantile Exchange.

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 midmorning trading, the Dow fell 103.40, or 0.80 percent, to 12,763.38.

A day after the stock market notched a modest advance, broader stock indicators were also lower. The Standard & Poor's 500 index fell 10.73, or 0.77 percent, to 1,386.95, and the Nasdaq composite index fell 14.01, or 0.57 percent, to 2,437.23.

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 3.74 percent from 3.78 percent late Thursday.

Gold prices rose, while the dollar traded mixed against other major global currencies.

The economic figures arriving Friday illustrated the slowdown in the U.S. economy. The Commerce Department's report on the trade deficit showed a bigger-than-expected decline. The deficit stood at $58.2 billion, a decline 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 $2.68, or 6.1 percent, to $41.47 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. The financial services company logged $13.22 billion in revenue during the first quarter. Citi, one of the Dow 30 stocks, slipped 1 cent to $24.29.

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 27 cents to $20.89.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 151.4 million shares.

The Russell 2000 index of smaller companies fell 4.91, or 0.67 percent, to 714.75.

Overseas, Japan's stock market fell 2.06 percent. In afternoon trading, Britain's FTSE index fell 1.33 percent, Germany's DAX index fell 1.18 percent, and France's CAC-40 fell 2.01 percent.

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