Crude oil at $124, another record

By Charley Blaine and Elizabeth Strott

The buying in crude oil just won't quit.

Crude hit a new closing high today of $123.69 a barrel in New York, up 16 cents from Wednesday, and jumped to $124.61 a barrel in electronic after-hours trading this afternoon.

Oil's surge to record highs came after an early bout of selling took crude to as low as $121.58 and helped stocks climb back from Wednesday's drubbing, which had seen the Dow Jones industrials tumble 206 points.

But the boost faded toward the close on reports of continue. Up 96 points at 1:55 p.m. ET, the Dow closed with a 52-point gain to 12,867. The Standard & Poor's 500 Index was up 5 points to 1,398, and the Nasdaq Composite Index was up nearly 13 points to 2,451.

Energy, commodity and metals stocks were the market leaders today. Dow component Chevron (CVX, news, msgs) was up 2.3% to $97.44. Aluminum giant Alcoa (AA, news, msgs) was the Dow leader, up 4.1% to $39.65.

Steel makers United States Steel (X, news, msgs) and Nucor (NUE, news, msgs) were up 3.3% to $173.31 and 4.2% to $81.87, respectively. Freeport-McMoRan Copper and Gold (FCX, news, msgs) was up 3.2% to $118.07.

Decent April sales for Dow component Wal-Mart Stores (WMT, news, msgs) pushed its shares up 0.6% to $57.16, but retail stocks generally were lower today.

Meanwhile, financial stocks were the overall market's weak link in part because of worry that Dow component American International Group (AIG, news, msgs) would report a huge first-quarter loss after the close.

AIG did, in fact, deliver a worse-than-expected loss and said it would be raising more than $12 billion in new capital to cope with continued stress in the credit markets. Shares slumped in after-hours trading and could pressure the stock market on Friday.

So, too, could any news from Citigroup's (C, news, msgs) analyst day on Friday. There's been big pressure to break the troubled financial giant apart. Citigroup was down 0.7% to $24.30 today. It is up 30% from its March lows.

The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund, which mimics the financial sector of the S&P 500, was down 1.5% today to $26.13. The ETF is down nearly 6% this week, and today it was the weakest of ETFs that track S&P 500 sectors.

Meanwhile, weekly initial jobless claims fell by 18,000 to a seasonally adjusted average of 365,000, the Labor Department reported this morning. Initial claims were up 17% from last year. Economists had expected claims to fall to 370,000.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$123.69	$123.53	$0.16	9.02%	28.87%
Heating oil (per gallon)	$3.5098	$3.4473	$0.0625	10.48%	32.48%
Natural gas (per million BTU)	$11.2630	$11.3270	-$0.0640	3.87%	50.51%
Unleaded gasoline (per gallon)	$3.1378	$3.1182	$0.0196	7.05%	25.98%

AIG has big loss, needs new capital

There was good reason to be wary of American International Group's earnings report. The world's largest insurance company reported a $7.81 billion first-quarter loss, its second big quarterly loss in a row.

It also announced plans to raise $12.5 billion by selling new shares, equity-linked securities and fixed-income securities with a large equity component included.

But the company startled Wall Street by raising its dividend 10% to 22 cents a share.

"Why would you dilute your shareholders and raise your dividend?" asked William Smith, CEO of Smith Asset Management in New York. "How do you justify that? This could be one of the craziest things I've ever seen in my life."

The loss was worth $3.09 a share and was down from a profit of $4.1 billion, or $1.58 a share, a year ago. Adjusted for one-time items, AIG lost $3.56 billion, or $1.41 a share, compared with Wall Street's consensus estimate for a loss of 76 cents a share.

In the fourth quarter, the company reported a loss of $5.9 billion, or $2.08 a share.

The stock had fallen 2.1% to $44.15 and dropped an additional 7.6% in after-hours trading to $40.80. The weak U.S. housing market and disruption in credit markets in the quarter hurt results, the company said.

"While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," CEO Martin Sullivan said in a statement.

The insurance giant took $9.11 billion in charges on its credit-default swaps and recorded $6.09 billion of investment losses. The losses weren't quite as bad as feared, The Wall Street Journal noted. Friedman, Billings, Ramsey analyst Bijan Moazami had estimated write-downs on AIG's derivatives portfolio could reach $12.1 billion.

Microsoft won't run a Yahoo slate

Microsoft (MSFT, news, msgs) has released candidates it tapped to serve on an alternative slate of directors prepared in case of a hostile takeover bid for Yahoo (YHOO, news, msgs), The Wall Street Journal reported tonight. (Microsoft is the publisher of MSN Money.)
The move suggests the software giant doesn't intend to abruptly change course and revisit its acquisition offer for Yahoo, first made more than three months ago.
Microsoft pulled its acquisition bid last weekend, after failing to reach an agreement with Yahoo over price. The bid was originally valued at $31 a share.

Microsoft closed at $29.27 today, up 0.2%. Yahoo closed up 2.3% to $26.22.

Wal-Mart: Consumers are cautious

U.S. shoppers are becoming big-time penny-pinchers, and the winners from their frugality are Wal-Mart, Costco Wholesale (COST, news, msgs) and others offering discount prices and cheaper gasoline.

Despite the stronger-than-expected April, Wal-Mart offered conservative guidance for May. The retail giant said it expects May sales to be flat to up 2%, excluding gasoline.

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Last week, Wal-Mart said it would not charge consumers who want to cash their stimulus checks, an area where the company may find some upside.

"Wal-Mart has great prices, so customers can count on us to make their money go further," said Eduardo Castro-Wright, the chief executive officer of the company's U.S. stores. "This early in the process, it's difficult to accurately forecast what impact the stimulus checks will have on consumer spending."

Costco reported an 8% rise in April same-store sales, better than analysts' expectations of a 6% increase. Excluding gasoline, sales rose 5%. Shares finished down 1.2% to $71.20.

"We are of course benefiting from some inflation on the food side as a result of the recent run-up in the cost of commodities and the continued run-up in the price of oil and gasoline," a prepared statement from Costco said.

"We don't think retailers are out of the woods yet, but things are clearing up," Craig Johnson, the president of Customer Growth Partners, told Bloomberg News. Consumers "know we're still in economically challenged and uncertain times, so they want the most value for their dollar."

TJX (TJX, news, msgs), which operates TJ Maxx and Marshalls, reported a better-than-expected 8% rise in April sales, but shares were down 2.4% to $31.

Conservative thinking among consumers is one explanation for disappointing results from Limited Brands (LTD, news, msgs), which owns Victoria's Secret and Bath & Body Works. Limited said same-store sales fell 5% in April, worse than the expected 2.3% decline. Shares rose 1.8% to $17.93 on the day.

High-end retailers did not feel the same pain. Saks (SKS, news, msgs) said April same-store sales rose 23.9%, soaring above analysts' expectations of a 1.1% rise. Saks said sales were boosted by promotional activity last month, with women's designer apparel, jewelry and handbags doing well. But Saks shares still fell 2.8% to $12.70 on the day.

The International Council of Shopping Centers said April retail sales rose 3.6% from the same month last year, the strongest monthly gain in more than a year.

"Although the economic headwinds remain brisk, April year-over-year retail-chain store sales got a lift . . . due to the shifting Easter date (which resulted in an extra Sunday of sales in April 2008 versus April 2007)," said Michael Niemira, the council's chief economist. Easter fell in March this year.

Best Buy goes to Europe

Electronics retailer Best Buy (BBY, news, msgs) has been doing a little shopping of its own, crossing the Atlantic to pay $2.1 billion for a 50% stake in Britain's Carphone Warehouse. The move will allow Best Buy to tap into the European electronics market, which the companies estimate is worth about $174 billion.

The venture will include Carphone's 2,400 stores in nine European countries. Wall Street was skeptical about the move. Best Buy shares fell 3.2% to $42.05.

Toyota hit by weak dollar

The weak U.S. dollar took its toll on Toyota Motor (TM, news, msgs).

The Japanese automaker said it earned $3 billion in its fiscal fourth quarter, a 28% decline from last year and the company's first decline in three years. Toyota also cautioned that earnings this year would fall 27% because of weak sales in the U.S.

"There is no mistake that things are seriously tough, even for Toyota," Tsuyoshi Mochimaru, an auto analyst at Lehman Bros., told CNNMoney.

The company sounded optimistic, game for a challenge, as usual.

"We are facing a severe business environment," President Katsuaki Watanabe said. "Toyota considers this headwind as a valuable opportunity to turn it into a more flexible and stronger company."

Shares of Toyota were down 4% to $100.56 today.

Toyota's dogged determination to improve, through good times and bad, has made the company a major threat to the Big Three U.S. automakers. The Japanese company's first-quarter global sales beat those of General Motors (GM, news, msgs).

News Corp. profit soars

Media giant News Corp. (NWS, news, msgs) late Wednesday said its fiscal-third-quarter profit had more than tripled, thanks to a gain from the sale of its stake in DirecTV Group (DTV, news, msgs).

News Corp. earned $2.7 billion, or 91 cents per share, up from $871 million, or 27 cents per share, in the same period last year. Revenue jumped 16% to $8.75 billion.

News Corp. shares rose 2.5% to $19.68 on the day.

News Corp. is no longer engaged in any talks with either Microsoft or Yahoo, the company said.

In recent weeks, reports circulated that Yahoo was talking with News Corp. in an effort to stave off an unfriendly takeover by Microsoft and that Microsoft was talking with News Corp. in hopes of adding muscle to its bid for Yahoo. Last weekend, Microsoft scuttled its effort to acquire Yahoo.

Short hits from the markets -- 4 p.m.

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.620%	1.630%	-0.010	20.90%	-48.41%
5-year Treasury note yield	3.004%	3.101%	-0.097	-0.96%	-13.05%
10-year Treasury note yield	3.805%	3.867%	-0.062	1.22%	-5.70%
30-year Treasury bond yield	4.564%	4.622%	-0.058	1.49%	2.35%
Currencies
U.S. Dollar Index	73.570	73.690	-0.120	1.17%	-4.07%
British pound in dollars	$1.9562	$1.9550	0.0011	-1.60%	-1.66%
Dollar in British pounds	£0.5112	£0.5115	-0.0003	1.63%	1.69%
Euro in dollars	$1.5425	$1.5401	0.0024	-1.25%	5.54%
Dollar in euros	€ 0.6483	€ 0.6493	-0.0010	1.27%	-5.25%
Dollar in yen	103.80	104.65	-0.85	-0.13%	-7.20%
Canadian dollar in U.S. dollars	$0.986	$0.991	-$0.0050	-0.81%	-0.71%
U.S. dollar in Canadian dollars	$1.015	$1.009	$0.0059	0.90%	0.73%
Commodities
Gold	$882.10	$871.20	$10.90	1.97%	5.26%
Copper	$3.7875	$3.8630	-$0.08	-3.00%	24.55%
Silver	$16.8700	$16.6950	$0.18	1.67%	13.07%
Corn	$6.3025	$6.1300	$0.17	5.00%	38.36%
Crude oil (NYMEX) (per barrel)	$123.69	$123.53	$0.16	9.02%	28.87%