By | May 9, 2008
Wall Street fell sharply early today as investors contended with wider-than-expected losses at insurer American International Group Inc. and another worrisome spike in oil prices.
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. In premarket electronic trading on the New York Mercantile Exchange, crude futures rose above $126 a barrel for the first time before giving back some of its advance.
The Commerce Department said the American trade deficit narrowed in March as demand for imports registered the biggest decline since the last recession was ending.
In the first hour of trading, the Dow Jones industrial average fell 94.44, or 0.73%, to 12,772.34.
A day after the stock market notched a modest advance, broader stock indicators were also lower. The Standard & Poor's 500 index fell 9.90, or 0.71%, to 1,387.78, and the Nasdaq composite index fell 14.72, or 0.60%, to 2,436.52.
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% from 3.78% late yesterday.
Gold prices rose, while the dollar traded mixed against other major global currencies.
The economic figures arriving today illustrated the slowdown in the American 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% 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.
In corporate news, Citigroup Inc. said it is aiming for 9% revenue growth as it looks to recover from financial hits following 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 30 stocks that comprises the Dow industrials, rose 27 cents to $24.57.
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 28 cents to $20.87.
Overseas, Japan's stock market fell 2.06%. In afternoon trading, Britain's FTSE index fell 1.33%, Germany's DAX index fell 1.18%, and France's CAC-40 fell 1.99%.
