Published May 9, 2008 4:22 PM
by Mark Glassman (Author Archive)

Dow Drops 312 in a Week

News at a Glance



  • In the Red: Stocks fall again; Dow down 312 for the week.


  • Financial Fears: AIG loss stokes credit crunch anxiety.


  • New Record for Oil: Crude up $2+, tops $126 a barrel.


  • Citi Sale: Bank plans to sell $400+ bln in assets.


    • The Lowdown



    The credit crunch continues to haunt traders.

    Stocks finished sharply lower Friday on more fear over the health of the financial sector. Hit by its second triple-digit loss in three days, the Dow Jones Industrial Average lost 121 points, or 0.9%, to 12746. The Dow finished down 312 for the week. The broader indexes also posted losses. The Nasdaq dropped 6 to 2446, and the S&P 500 lost 9 at 1388.

    On Friday, it was a first-quarter letdown from insurer AIG that frustrated traders and sent financials tumbling. The firm swung to a $7.8 billion loss on credit swaps and the declining value of its mortgage-backed assets. The results were consistent with recent predictions from analysts (and, well, Warren Buffett) that severe writedowns at financials firms are far from over.

    Meanwhile, Citigroup (C) took a step toward streamlining itself. The bank announced plans to sell off at least $400 billion in non-core assets by the middle of 2011. Citi also said it is now aiming for annual revenue growth of 9% and earnings upwards of $20 billion. Traders appeared skeptical.

    Financials had already taken a big hit this week after the Securities and Exchange Commission announced Wednesday that it plans to force banks, brokerages and lenders to be more transparent about their exposure to bad debts.

    Oil prices hit a record high above $126. By 4:13 p.m., crude traded up $2.47 on the day at $126.16 a barrel. Still, energy stocks sagged and helped depress the major indexes.

    The materials sector also showed weakness and gave back a portion of Thursday's gains. Steel, aluminum and gold firms carried losses into the afternoon.

    In economic news, the trade gap narrowed in March to $58.2 billion, as the U.S. imported fewer auto parts and industrial supplies (not great signs for the economy).

    The world's major indexes declined. In Asia, the Nikkei dropped 2.1%, while the Hang Sang lost 1.5%. In Europe, the FTSE dropped 1.1%.


    Corporate News



  • Clear Channel Communications (CCU) posted a 70% increase in first-quarter net income, excluding discontinued operations, the firm said. Still, Clear Channel missed estimates. The company earned $161.4 million, or 32 cents a share, up from $95.1 million, or 19 cents a share, in the year-ago period, the firm said. "While our results were affected by the soft advertising market, we continued to out-deliver the majority of our media industry peers," Chief Executive Mark Mays said in a statement.


  • American International Group (AIG) swung to a first-quarter loss as credit swaps and mortgage-back securities weighed on the firm's balance sheet. AIG lost $7.8 billion, or $3.09 a share, down sharply from a net gain of $4.1 billion, or $1.58 a share, in the year-ago period, the firm said. Excluding one-time items, AIG lost $1.41 a share, nearly twice the loss Wall Street had been expecting (76 cents a share). President and Chief Executive Martin Sullivan called the firm's losses "beyond our expectations." AIG said it would seek to raise $12.5 billion in capital, potentially diluting shares. On the upside, the firm said it would boost its dividend 10% to 22 cents a share.


  • Bristol-Myers Squibb (BMY) and Sanofi-Aventis (SNY) could face generic competition in Europe for its blood thinner Plavix, The Wall Street Journal reported. Regulators in Germany and Luxembourg are close to approving a version of the drug made by the Swiss generic company Schweizerhall Holding. Plavix is the second-most popular drug in the world. Separately, Bristol-Myers CEO James Cornelius bought 100,000 shares of the firm's stock earlier this week worth about $2.3 million, according to a regulatory document.


    • The Economy



  • The U.S. trade gap, or the difference between imports and exports, narrowed to $58.2 billion in March, down from a revised $61.7 billion in February, the Commerce Department said. Economists had expected the gap to come in at $61.3 billion last month. REPORT


    • ReadMe



  • Forbes on government intervention: A survey of how federal officials have worked to curb the effects of the credit crunch and the decline of the housing market. STORY


  • BusinessWeek on buying a home: The spike in foreclosures has left banks flush with houses, assets they are anxious to shed. That is good news for home buyers. STORY


  • The Washington Post on the oil lobby: Integrated energy companies are funding a media push to tell Americans that higher energy prices are not necessarily their fault. STORY


    • WatchMe



  • How It's Made: The program looks at car, grocery carts and collectable coins. DSC, 7 p.m.


  • Modern Marvels: The show examines snack factory innovation, including technologies involved in the production of pretzels, Snickers and Tootsie Rolls. NGC, 8 p.m.


  • Business Nation: The episode includes a profile of Magic Johnson, whose business brings high-end firms to urban communities, and a look at Brazil's farming industry. CNBC, 9 p.m.


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    Related Quotes

    CCU 27.35 Down-0.87 -3.08%
    AIG 2.43 Down-0.37 -13.21%
    BMY 17.33 Down-1.37 -7.33%
    SNY 26.79 Down-1.80 -6.30%