Stocks Lose Ground Amid Economic Woes. Gasoline could hit $4 as crude breaks records. AIG Shares Slip on 4Q Loss

Feb.29, 2008 in Market Outlook

Stocks Fall As Economic Reports, Disappointing Quarterly Reports Stir Concerns About Economy

NEW YORK (AP) — Stocks fell sharply Friday after a series of economic and earnings reports and a further rise in oil prices stoked concerns about the health of economy. The major stock indexes fell more than 1.5 percent, with the Dow Jones industrials giving up more than 250 points.

Investors were unnerved by disappointing quarterly results from American International Group Inc. and Dell Inc. And an index of regional business activity that Wall Street regards as a precursor to a broader report registered its weakest reading in more than six years.Adding to Wall Street’s list of worries, oil prices continued to stir concern about inflation after topping $103 per barrel overnight for the first time.

While stocks made sharp gains in the first three days this week even amid lackluster economic readings, the litany of concerns investors succumbed to Friday reflected the undercurrent of uncertainty that has kept Wall Street on edge for months.

“We really had to face a plethora of negative news,” said Art Hogan, chief market strategist at Jefferies & Co. in Boston.

Hogan said while stocks had managed impressive gains for much of the week, Fridays have been difficult days for Wall Street in the past year or so since cracks began to appear in the credit markets and as concerns have emerged about the economy. Investors worry that unwelcome news might break on the weekends, causing selling pressure in the week’s final session.

Gasoline could hit $4 as crude breaks records

NEW YORK (Reuters) - Motorists may face gasoline prices as high as $4 a gallon this summer as crude oil costs smash records, painting a bleak picture for consumers already feeling the pinch of an economic slowdown.

Crude oil, the main feedstock refiners use to make fuel, hit an all-time peak over $102 a barrel Thursday, nearly doubling prices from a year ago amid a surge in speculative investment.

“American consumers know these oil prices are an unpleasant omen of events likely to occur at the nation’s gas pumps over the next few months,” said Geoff Sundstrom, spokesman for travel and auto group AAA.

“If current oil prices hold, American drivers should expect to pay new record high prices for gasoline which could easily reach $3.50 per gallon or more by summer. In some regions of the country the average price could approach $4 per gallon,” Sundstrom said.

Surging energy costs have stiffened the head winds on the U.S. economy, which is already slowing in the fallout of a housing slump and credit crisis.

High gasoline prices are stoking fears that the economy will continue to worsen, U.S. President Bush said on Thursday.

“That creates a lot of uncertainty,” Bush said. “If you’re out there wondering what your life is going to be like and you’re looking at $4 a gallon, that’s uncertain.”

Shares of American International Group Slip on $5.3 Billion Loss in 4th Quarter

NEW YORK (AP) — American International Group Inc.’s stock slipped Friday after the insurer reported the credit crisis has eaten into the company’s investments.AIG lost $5.3 billion in the fourth quarter, mainly because of a portfolio of contracts known as credit default swaps.

These contracts, which pledge to cover missed payments on $579 billion of debt, lost more than $11 billion in value during the fourth quarter because of the perception that the insured debt is less likely to be repaid.

The insurer also lost more than $3 billion in its investment portfolio because of “significant, rapid declines” in the value of mortgage debt.

Keefe, Bruyette & Woods analyst Cliff Gallant cut his rating on AIG’s stock to “Market Perform” from “Outperform.” AIG suffers from “lingering balance sheet questions and now signs of profit deterioration,” he said.

Shares of AIG slipped $3.08, or 6.1 percent, to $47.07 in midday trading. The stock had fallen Thursday in anticipation of the company’s report, and the shares are now down 10 percent in the past two days.

http://biz.yahoo.com/ap/080229/apfn_aig_mover.html

Did you like this? If so, please bookmark it,