UNITED States stocks had the first weekly drop in a month after new disclosure requirements for investment banks and American International Group Inc's need to raise US$12.5 billion spurred concern of further losses for financial firms.
Merrill Lynch & Co, Lehman Brothers Holdings Inc and Goldman Sachs Group Inc fell after the Securities and Exchange Commission said Wall Street firms will have to disclose capital and liquidity levels. AIG had the steepest weekly drop in at least 25 years after the world's biggest insurer by assets posted a record quarterly loss. The firm's vice chairman said there's "no assurance" credit-market losses are over.
The Standard & Poor's 500 Index lost 1.8 percent to 1,388.28 last week. The Dow Jones Industrial Average fell 2.4 percent to 12,745.88. The Russell 2000 Index of small-cap stocks shed 0.8 percent to 720.05. The Chicago Board Options Exchange Volatility Index, or VIX, the benchmark for US options prices, jumped 6.8 percent to 19.41.
"The financial sector is going to continue to be a drain," said Dan Genter, president of RNC Genter Capital Management in Los Angeles. "The market had a short time period of feeling like it's over and we escaped. Now there's a realization that this isn't over."
Financial firms are sinking under the weight of US$323 billion in writedowns and losses caused by the collapse of the subprime-mortgage market. While members of the industry in the S&P 500 have gained 11 percent since March 17, the group has still declined 11 percent in 2008. Financials also dragged down first-quarter profit growth for the S&P 500 to a decline of 18 percent, according to Bloomberg News data.
AIG dropped 18 percent to US$40.28 last week after posting a first-quarter net loss of US$7.81 billion, against earnings of US$4.13 billion a year earlier. Its loss of US$1.41 a share was four times bigger than the average analyst estimate.
Schumer's call
"There are certain areas like insurers and some of the big brokers that still have risks associated with them," Jeffrey Kleintop, chief market strategist at LPL Financial Services in Boston, said in an interview with Bloomberg Television. "We've got to get well past this healing process that's starting to unfold to really get a sense of whether there's a lot more to the downside. It's just such an opaque institution."
Countrywide Financial Corp lost 20 percent to US$4.76. US Senator Charles Schumer urged Bank of America Corp to consider cutting the price it pays for the biggest US mortgage company if past profits were based on bad lending practices.
Yahoo! Inc lost 9.6 percent to US$25.93, including the steepest one-day plunge in almost two years. Microsoft Corp, the world's biggest software company, abandoned its US$50 billion bid for the owner of the most-visited US Website because executives couldn't agree on a price.
All 16 home builders in Standard & Poor's indexes fell. Pending sales of existing homes fell for the fourth time in five months, according to the National Association of Realtors, signaling no end in sight to the housing recession. D.R. Horton Inc retreated 5.2 percent to US$14.83, and Lennar Corp lost 4.5 percent to US$18.41.
Oil climbed to a record closing price of US$125.96 a barrel, pushing shares of energy companies to the biggest weekly gain among the S&P 500's 10 industries.
Anadarko Petroleum Corp rose to an all-time high last Thursday and rose 14 percent to US$76.33 for last week after the second-largest independent oil producer in the US posted profit that exceeded analysts' estimates.
Macy's Inc, the second-biggest department store chain, led drops among retailers as it lost 12 percent to US$23.21.