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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.955034 |
| Euro to US Dollar | 1.548947 |
| Japanese Yen to US Dollar | 0.009721 |
| Canadian Dollar to US Dollar | 0.994827 |
Crude oil jumped above $126 a barrel for the first time Friday, and stocks tumbled after insurance giant American International Group (AIG, news, msgs) surprised investors with a much-larger-than-expected first-quarter loss. The day's setbacks sent stocks to their first weekly loss after three weeks of gains.
The stress the markets experienced all day may extend into next week unless energy prices break.
"I'd never thought I would live to see this happen," said analyst Peter Beutel of Cameron Hanover, an energy consulting firm in New Canaan, Ct.
At the same time, AIG's big loss reminded investors around the world that the credit crunch hasn't been fixed yet.
Crude jumped over $126 a barrel in electronic trading and closed at a new high of $125.96, up $2.27 on the day and up $9.64, or 8.3%, on the week. It was crude's largest weekly gain since March 2007.
The Dow Jones industrials fell 121 points, or 1%, to 12,746 in the aftermath of AIG's big loss, which pushed the stock down nearly 8.8% to $40.28. The Standard & Poor's 500 Index was off 10 points, or 0.7%, to 1,388, and the Nasdaq Composite Index was off 6 points, or 0.2%, to 2,446.
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The Dow was down 2.4% on the week and is off 3.9% on the year. The S&P 500 was off 1.8% on the week and is down 5.5% this year. The Nasdaq's loss for the week was 1.3%; it's down 7.8% for the year.
AIG was the worst performer among the 30 Dow stocks and second-worst among S&P 500 stocks.
Package shipper FedEx (FDX, news, msgs) added to the market's worries after Friday's close.
The company said it expects second-quarter earnings of $1.45 to $1.50 a share, down from a previous forecast of $1.60 to $1.80. The Wall Street consensus estimate was $1.69 a share. The reason for FedEx's lower forecast: a 7% increase in fuel costs.
It was the second time that FedEx has cut its profit outlook for the quarter, and it assumes, CFO Alan Graf told The Wall Street Journal, no more fuel increases and no further weakening of the economy.
FedEx was down 3.1% to $90.37 in regular trading and an additional 3.6% in after-hours trading to $87.16. Rival United Parcel Service (UPS, news, msgs) was down 1.1% to $70.29 in regular trading and an additional 1.4% to $69.31 in after-hours trading.
Stock Chart (Year)
FedEx
That could push the overall market lower because many investors had been betting the rally since this winter would continue because the Dow Transports have been rising. As MSN Money's Jim Jubak notes, classic Dow Theory says that the transports are a leading indicator for the stock market as a whole.
Next week also will feature the consumer price index report on Wednesday, a report on housing starts and building permits on Friday and a heavy week of earnings reports.
The featured earnings reports will come from Wal-Mart Stores (WMT, news, msgs) on Tuesday and Hewlett-Packard (HPQ, news, msgs) on Thursday.
Despite oil's rise, energy shares fall
Pushing crude higher Friday was continuing unrest in Nigeria and strong global demand. Plus, there was speculation that purported evidence of Venezuelan involvement with rebel groups in Colombia could force the United States to impose sanctions. That, in turn, might cause Venezuelan President Hugo Chávez to cut off oil sales to the U.S.The price run-up gives motorists little hope of relief at the gas pump. AAA's daily survey showed the national retail average for regular unleaded gas at $3.67 a gallon Friday, up 2.6 cents from Thursday and 33 cents from a month ago.
But energy shares were actually moving lower Friday, perhaps a signal that the enormous rally in crude and related prices was starting to peak. "People are looking at the move in crude and saying it's unsustainable and due for a pullback," Michael Chren of Allegiant Asset Management in Palm Beach Gardens, Fla., told Bloomberg News.
A blow-off in oil prices is coming, Cameron Hanover's Beutel agreed, because prices have risen too far and way too fast. "This is madness," he said.
Valero Energy (VLO, news, msgs), a big independent refiner, was down 3.1% to $44.85. The stock is down a third this year because its profit margins are getting squeezed. Crude prices are rising faster than the prices Valero charges customers.
Anadarko Petroleum (APC, news, msgs), a big natural-gas and oil producer, dropped 1.7% to $76.33. The stock is up 16% this year and 135% from the end of 2004.
Dow components ExxonMobil (XOM, news, msgs) and Chevron (CVX, news, msgs) were down 1.2% to $88.82 and 0.1% to $97.39, respectively.
The moving averages have their say
Stocks had been rallying nicely from their lows of this past winter until Monday, when crude oil abruptly jumped over $120 a barrel. At the same time, the major averages had hit their 200-day moving averages. Technically minded traders, who study market charts, clearly saw those averages as resistance levels and started to sell.- This chart shows how the S&P 500 pulled back when it reached its 200-day moving average.
Only six of the 30 Dow stocks showed gains on Friday, led by JPMorgan Chase (JPM, news, msgs), up 1.1% to $46.57, along with 156 S&P 500 stocks and 44 Nasdaq-100 ($NDX.X) stocks. The index was off nearly 7 points, or 0.3%, to 1,960.
The S&P 500 was led by H&R Block (HRB, news, msgs), up 7.8% to $23.57 after a regulator lifted a requirement that the company set aside reserves for its bank. It was Block's biggest one-day gain in almost three years.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 12,745.88 | 13,058.20 | -2.39% | -3.91% |
| S&P 500 | 1,388.28 | 1,413.90 | -1.81% | -5.45% |
| Nasdaq Composite | 2,445.52 | 2,476.99 | -1.27% | -7.80% |
| Russell 2000 | 720.05 | 725.74 | -0.78% | -6.00% |
| Crude oil per barrel | $125.96 | $116.32 | 8.29% | 31.24% |
| 10-yr. Treasury yield | 3.77% | 3.85% | -2.03% | -6.64% |
| Gold per troy ounce | $885.20 | $858.00 | 3.17% | 5.63% |
Is AIG a good company amid bad credit markets?
The battering absorbed by AIG shares was responsible for 32 points, or 26%, of the Dow's loss Friday.AIG said late Thursday that it had lost $7.81 billion, or $3.09 per share in the quarter -- down from a profit of $4.13 billion, or $1.58 a share, a year ago. The results fell far short of analysts' expectations of a 76-cent-a-share loss.
AIG said it had written down $9.11 billion in credit-related securities and taken a $6.09 billion loss on its investment portfolio, which includes subprime-mortgage-backed securities. The New York company said it plans to raise $12.5 billion by selling new stock and fixed-income securities to help cover the massive losses.
Stock chart (year)
American International Group
Analysts, investors and even the company's executives were shocked by the size of AIG's big loss. "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," Chief Executive Martin Sullivan said in a prepared statement.
Credit-rating agency Standard & Poor's lowered AIG's rating to AA- and put it on watch for another possible downgrade.
"Although we expected that AIG would have some losses in the first quarter, the level of the additional losses exceeds these expectations," said S&P analyst Rodney Clark in a press release.
Sullivan argued that the company's woes were due to external factors. "They reflect the extremely adverse external conditions affecting the spectrum of companies exposed to the U.S. residential housing, credit and capital markets," he said.
But AIG's optimism may not be enough to sway worried investors. The stock has lost 37% of its value over the past year.
More from MSN Money
But while subprime and credit problems still loom, many people, including JPMorgan Chase (JPM, news, msgs) CEO Jamie Dimon, Treasury Secretary Hank Paulson and investing gurus Warren Buffett and George Soros have all said recently that they think the worst is over.
Can Citigroup's Pandit turn the giant around?
Citigroup (C, news, msgs) CEO Vikram Pandit on Friday provided a skeptical Wall Street an outline of his plans to turn around the biggest U.S. bank. Though there was positive chatter about Pandit's plans, the stock was weighed down by the AIG loss, finishing the day down 2.8% to $23.63. The stock is off more than 52% in the past year.Pandit, who replaced Chuck Prince in December, has been reviewing the bank and its operations for the past five months.
Stock chart (year)
AIG
Pandit also said he is targeting revenue growth between 8% and 10% annually, though plans "will take some time." The company is focused on managing risk, boosting asset productivity and producing solid returns, he said.
"He's carting off the nonsignificant operations and raising money so that he can reinvest it in the business he's in, which is loaning money," Robert Olstein, the chief investment officer of Olstein Capital Management, told Bloomberg News.
Citigroup, like AIG, Merrill Lynch (MER, news, msgs) and other financial-services companies, has been hit hard by the subprime mess. Under Pandit, Citigroup has raised $44 billion in capital, the most of all the financial-services companies that have suffered through the credit crunch.
Microsoft appeals EU fine
Microsoft (MSFT, news, msgs) shares were up 14 cents to $29.39 Friday after the software giant said it is appealing the $1.38 billion fine imposed on the tech giant by the European Commission for failing to comply with a landmark antitrust ruling. (Microsoft is the publisher of MSN Money.)The fine is based on the commission's decision that Microsoft hadn't complied with an antitrust ruling for 488 days. The $1.38 billion fine was still only 60% of the maximum fine the commission had said it could apply under EU law.
Microsoft has a long and difficult antitrust history with the commission, which is now investigating the company on two accounts of monopolistic behavior.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $125.96 | $123.69 | $2.27 | 11.02% | 31.24% |
| Heating oil (per gallon) | $3.6360 | $3.5098 | $0.1262 | 14.45% | 37.24% |
| Natural gas (per million BTU) | $11.5370 | $11.2630 | $0.2740 | 6.40% | 54.18% |
| Unleaded gasoline (per gallon) | $3.2012 | $3.1378 | $0.0634 | 9.21% | 28.52% |
Airlines boost fares
Soaring fuel prices are hurting FedEx. They've also prompted three major airlines to increase fares.AMR's (AMR, news, msgs) American Airlines, Delta Air Lines (DAL, news, msgs) and UAL's (UAUA, news, msgs) United Airlines this week raised round-trip ticket prices by $20 to try to make up for the cost of fuel. Fuel surcharges will now be $130 round trip on a number of flights. Jet fuel is up 78% over the past year, according to the Energy Information Association.
Delta, which had already raised prices in the past week, initiated the price increase.
"This is obviously a result of the current market, and fares have to reflect the cost of doing business," Delta spokeswoman Betsy Talton told The Associated Press.
Delta shares rose 1.1% to $7.65 Friday. UAL shares were up 1.3% to $13.71, but AMR shares fell 1.4% to $8.19.
Circuit City opens its books
Electronics retailer Circuit City (CC, news, msgs) on Friday said it is on the block, and the stock jumped nearly 9% to $5.07 on the news.Circuit City will allow Blockbuster (BBI, news, msgs) and its biggest investor, billionaire Carl Icahn, to look at its books in connection with the disclosure of Blockbuster's offer to acquire Circuit City last month; Blockbuster had offered $6 to $8 per share in February.
In a letter to Circuit City, Icahn said he is standing by should Blockbuster fail to receive financing for a deal.
Circuit City also said it has hired Goldman Sachs (GS, news, msgs) to assist the company in exploring its strategic alternatives.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.650% | 1.620% | 0.030 | 23.13% | -47.45% |
| 5-year Treasury note yield | 2.961% | 3.004% | -0.043 | -2.37% | -14.30% |
| 10-year Treasury note yield | 3.767% | 3.805% | -0.038 | 0.21% | -6.64% |
| 30-year Treasury bond yield | 4.524% | 4.564% | -0.040 | 0.60% | 1.46% |
| Currencies | |||||
| U.S. Dollar Index | 73.230 | 73.665 | -0.435 | 0.70% | -4.52% |
| British pound in dollars | $1.9489 | $1.9558 | -0.0069 | -1.97% | -2.03% |
| Dollar in British pounds | £0.5131 | £0.5113 | 0.0018 | 2.01% | 2.07% |
| Euro in dollars | $1.5487 | $1.5408 | 0.0079 | -0.85% | 5.96% |
| Dollar in euros | € 0.6457 | € 0.6490 | -0.0033 | 0.86% | -5.63% |
| Dollar in yen | 103.00 | 103.74 | -0.74 | -0.89% | -7.91% |
| Canadian dollar in U.S. dollars | $0.995 | $0.983 | $0.0117 | 0.12% | 0.22% |
| U.S. dollar in Canadian dollars | $1.005 | $1.017 | -$0.0120 | -0.12% | -0.28% |
| Commodities | |||||
| Gold | $885.20 | $882.10 | $3.10 | 2.32% | 5.63% |
| Copper | $3.6360 | $3.7875 | -$0.15 | -6.88% | 19.57% |
| Silver | $16.7500 | $16.8700 | -$0.12 | 0.95% | 12.27% |
| Corn | $6.2925 | $6.3025 | -$0.01 | 4.83% | 38.14% |
| Crude oil (NYMEX) (per barrel) | $125.96 | $123.69 | $2.27 | 11.02% | 31.24% |
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