Stocks slide on oil and AIG
Wall Street retreats after crude and gas prices hit new record highs, and the insurer disappoints.
NEW YORK (CNNMoney.com) -- Stocks tanked Friday, with the Dow losing more than 100 points, after AIG's weak quarter revived worries about the credit crisis, and record oil and gas prices exacerbated fears about the threat of inflation.
The Dow Jones industrial average (INDU) lost nearly 1%. The broader Standard & Poor's 500 (SPX) index lost 0.7% and the Nasdaq composite (COMP) lost 0.2%.
Investors managed to shrug off record oil and gas prices Thursday, thanks to some better-than-expected April retail sales reports. But the spike in commodities was a drag on equities Friday. AIG's big quarterly loss and Citigroup's announcement that it will sell off about $400 billion in assets added to the session's woes.
"AIG and Citigroup are reminding people that there are still issues out there with financials," said John Forelli, portfolio manager at Independence Investments.
"At the same time, investors are grappling with high commodity prices and questions about how long they'll stay at these levels," he said. "So I think you're seeing them start to hunker down for an inflationary environment."
Wal-Mart Stores (WMT, Fortune 500), J.C. Penney (JCP, Fortune 500), Kohl's (KSS, Fortune 500) and Nordstrom (JWN, Fortune 500) are among the many retailers due to report quarterly results next week. Profit reports are also due from Hewlett-Packard (HPQ, Fortune 500), Sprint Nextel (S, Fortune 500) and Freddie Mac (FRE, Fortune 500).
Economic reports are due on retail sales, business inventories, consumer prices, manufacturing and housing.
Commodity prices surge: U.S. light crude oil for June delivery settled at a record $125.96 per barrel on the New York Mercantile Exchange, after hitting a trading record of $126.20 earlier.
The national average price for a gallon of regular unleaded gas rose to a record $3.671 from $3.645 the previous day, according to AAA.
COMEX gold for June delivery rose $3.70 to $885.80 an ounce.
Commodity prices have spiked over the last few weeks on supply concerns and continued global demand. The run-up has added to worries about how pricing pressure will hurt consumer spending, already stretched as a result of the weak economy. Consumer spending fuels two-thirds of economic growth.
"You're seeing the stock market succumbing to the fact that the oil run-up is going to bring some short-term pain," said Chris Johnson, CEO at Johnson Research Group.
AIG posts loss, Citigroup to shed assets: Insurer and Dow component AIG (AIG, Fortune 500) reported a steeper-than-expected quarterly loss late Thursday, and said it will look to raise $12.5 billion in capital. The news revived worries about the credit crisis, sending AIG shares down 8.8%.
Citigroup (C, Fortune 500) said Friday that it plans to sell off around $400 billion in assets, or 20% of its total, over the next two to three years as a means of becoming more "fit" and profitable. The company plans to sell off non-core businesses in stages. Shares slipped 2.8%.
In addition to AIG and Citigroup, other big Dow losers included Alcoa (AA, Fortune 500), DuPont (DD, Fortune 500) and General Motors (GM, Fortune 500).
On the upside, Activision (ATVI) shares hit a record high in active Nasdaq trade after the video-game publisher reported earnings that jumped from a year ago and topped estimates. Shares rose 14.2%.
Nvidia (NVDA) shares rallied in active Nasdaq trade after the company reported higher earnings that were short of analysts' forecasts. Nonetheless, a Stifel Nicolaus analyst upgraded the stock, saying downside risks are limited going forward. Shares gained 2.6%.
Market breadth was negative and volume was moderate. On the New York Stock Exchange, losers beat winners 8 to 7 on volume of 1.1 billion shares. On the Nasdaq, decliners topped advancers 5 to 4 on volume of 1.71 billion shares.
Trade gap narrows: The trade deficit shrank more than expected in March, as the demand for imports fell at a faster pace than the demand for exports, due to the impact of the weak dollar.
Other markets: The dollar fell versus the euro and the yen.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.77% from 3.78% late Thursday. Bond prices and yields move in opposite directions. 
