Credit crunch, oil surge trip market

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NEW YORK (AP) — 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. (AIG) 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.

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," he said.

But Mr. Orlando noted that the market has pulled back this week after a sizable rebound in the past 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 discretionary 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 percent, 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 percent, to 1,388.28, and the Nasdaq composite index fell 5.72, or 0.23 percent, to 2,445.52.

For the week, the Dow fell 2.39 percent, the S&P 500 declined 1.81 percent and the Nasdaq lost 1.27 percent.

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.

General Motors Corp., also a Dow component, fell 86 cents, or 4.1 percent, 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.

Investors' caution yesterday 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," Mr. Orlando said, pointing to expected reports on retail sales, retail inventories, industrial production and regional manufacturing.

Declining issues outnumbered advancers by about eight to seven on the New York Stock Exchange, where consolidated volume came to 3.40 billion shares, compared with 3.70 billion traded Thursday.