U.S. stocks fell, sending the market to its first weekly drop in a month, as American International Group Inc.'s plan to raise $12.5 billion to cover writedowns renewed concern more losses are coming in the financial industry.
AIG, the world's biggest insurer, tumbled to a two-month low and posted the steepest decline in the Dow Jones Industrial Average Delta Air Lines Inc. and Carnival Corp. led declines among companies hurt by higher fuel costs as oil climbed to a record for a fifth day. Mylan Inc., the largest U.S. maker of generic medicines, retreated the most since February after posting a wider first-quarter loss and sales that trailed analysts' estimates. Stocks slumped in Europe and Asia.
The Standard & Poor's 500 Index sank 10.3, or 0.7 percent, to 1,387.38 at 10:15 a.m. in New York, giving it a 1.9 percent decline this week. The Dow slid 104.86, or 0.8 percent, to 12,761.92. The Nasdaq Composite Index lost 11.37, or 0.5 percent, to 2,439.87. More than two stocks fell for each that rose on the New York Stock Exchange.
``We're still cautious on the financials,'' said Julie Van Cleave, who oversees $4.5 billion as head of large U.S. growth stocks at Deutsche Asset Management in Milwaukee. ``People have been looking for the easy turn. It will take another couple of quarters before we're at a point where we feel more comfortable making a bigger allocation.''
The S&P 500 is down 5.7 percent this year as losses at the world's largest financial firms have climbed to more than $321 billion following the collapse of the subprime mortgage market. Profits have slumped 18 percent on average for the 420 companies in the index that have reported first-quarter results so far, led by an 86 percent decline at financial companies, data compiled by Bloomberg show.
AIG Tumbles
AIG tumbled $2.67, or 6.1 percent, to $41.48. The insurer reported a first-quarter net loss of $7.81 billion, compared with earnings of $4.13 billion a year earlier. AIG wrote down contracts it had sold to protect investors by $9.11 billion in the quarter to comply with rules that require the company to estimate their present market value. Standard & Poor's and Fitch Ratings cut the company's credit grades after the announcement.
Citigroup Inc. the biggest U.S. bank by assets, slipped 7 cents to $24.23 on plans to ``wind down'' about $400 billion of assets as part of a program to return to profitability. The bank announced the wind-down today in a presentation posted on the company's Web site. The New York-based company, which lost $5.1 billion in the first quarter, has recorded more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year.
Delta, Mylan
Delta Air Lines dropped 2.6 percent to $7.37. Crude oil rose to a record above $126 a barrel, set for the biggest weekly gain in more than a year, on speculation Nigerian export cuts may curb U.S. supplies during the peak summer driving season.
Carnival, the largest cruise-line company, slumped 1.6 percent to $39.81.
Fuel expenses for the U.S. major airlines now represent about 40 percent of total costs for the industry, according to a research report by Merrill Lynch & Co. distributed yesterday.
Mylan fell 8.3 percent to $11.43, the second-biggest drop in the S&P 500. The largest U.S. maker of generic medicines reported a wider first-quarter loss on costs tied to the $6.9 billion purchase of Merck KGaA's generics division in October.
McDonald's Corp. fell 45 cents to $59.32. Goldman Sachs Group Inc. removed the world's largest restaurant company from its ``conviction buy list'' and added Burger King Holdings Inc. McDonald's had risen 16 percent since being added to the list June 12, and additional gains may be ``muted'' in the coming months, Goldman analysts led by Steven T. Kron wrote in a report. Burger King may benefit from price increases and extended summer hours, Goldman said.
Burger King fell 37 cents to $27.80.
Priceline.com
Priceline.com Inc. surged $15.63, or 13 percent, to $139.41. The Internet travel agency featuring William Shatner as its spokesman said annual profit, excluding some items, may be as much as $5.65 a share. That topped the average analyst estimate of $5.09 a share. First-quarter revenue gained 34 percent as international sales more than doubled, the company said.
Stocks failed to pare losses after the government said the U.S. trade deficit narrowed more than forecast in March as imports dropped by the most in more than six years, reflecting the economic slowdown. The gap shrank to $58.2 billion, the lowest this year, from a revised $61.7 billion in February, the Commerce Department said.
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