S stocks fall sharply on unexpected AIG losses, Wal-Mart forecast

Business Materials 8 August 2008 05:38 (UTC +04:00)

Major US stock indices tumbled Friday as an unexpected loss from American International Group and a Citigroup Inc legal settlement drove down financial shares, while bargain retailer Wal-Mart Stores Inc forecast slower sales growth, the dpa reported.

AIG late Wednesday reported 5.36 billion dollars in second-quarter losses related to the subprime mortgage crisis, sending shares 18 per cent lower in trading on Thursday. Investors speculated that the insurer would have to raise extra capital to overcome the heavy losses.

Citigroup reached a multibillion-dollar settlement with regulators and governments on claims it improperly urged customers to buy auction-rate securities - a type of bond that fell apart in conjunction with the subprime mortgage crisis.

Citigroup agreed to buy back 7.5 billion dollars worth of the auction-rate securities from customers and help institutional investors unload a further 12 billion dollars of the same securities.

Wal-Mart sent retail shares lower after forecasting a decline in August sales, saying that most tax rebates sent out by the US government had already been spent by consumers.

The blue-chip Dow Jones Industrial Average dropped 224.64 points, or 1.93 per cent, to 11,431.43. The broader Standard & Poor's 500 Index tumbled 23.12 points, or 1.79 per cent, to 1,266.07. The technology-heavy Nasdaq Composite Index was down 22.64 points, or 0.95 per cent, to 2,355.73.

The dollar rose to 65.24 euro cents from 64.87 euro cents on Wednesday but fell slightly to 109.35 Japanese yen from 109.65 yen.

Gold futures fell 5.10 dollars to 877.90 dollars per fine ounce.