Bears roaming Wall Street

NEW YORK (CNNMoney.com) -- Stocks looked set for a sharp decline at Friday's open as AIG's big loss raised credit jitters and soaring oil prices fanned inflation concerns.

Less than three hours before the open, Nasdaq and S&P futures were lower and pointing to heavy losses at the start for Wall Street.

Insurer AIG (AIG, Fortune 500) reported a quarterly $7.8 billion loss after the market close Thursday. The dismal results raised fears about the impact of the credit crunch on financial firms. Shares of the Dow component tumbled 7.4% in after-hours trading following the report.

Surging oil prices also kept investors wary about inflation. Crude futures broke the $125 mark for the first time in electronic trading early Friday to hit yet another record trading high of $125.12. While prices backed off slightly from that level, a barrel of light sweet crude was still up $1.13 to $124.82 in morning trading.

Investors have had a mixed reaction to surging oil prices. Stocks managed to finish higher Thursday - despite record crude prices - helped by some better-than-expected sales results from retailers.

Economic readings due Friday include a reading on the March U.S. trade gap. Economist forecast the trade deficit narrowed to $61.3 billion from $62.3 billion in February, as strong exports, helped by the weak dollar, and a cut in demand for imported consumer goods in the face of the economic slowdown here overcame rising prices paid for oil imports.

Companies to watch include electronics and defense company Harris Corp (HRS). The Wall Street Journal reported the firm has started exploring its strategic options, and could eventually decide to sell itself.

Citigroup (C, Fortune 500) is also in focus, with CEO Vikram Pandit due to to reveal his strategy for reviving the troubled firm at the company's investor day today.

Top Google (GOOG, Fortune 500) executives expressed hope late Thursday for a proposed advertising partnership with rival Internet search firm Yahoo (YHOO, Fortune 500) following a two-week test program between the firms that took place as Yahoo fought off a takeover bid from Microsoft (MSFT, Fortune 500).

General Motors (GM, Fortune 500) announced in a Securities and Exchange Commission filing that it was taking advantage of the weak real estate market to buy its previously leased headquarters in downtown Detroit's Renaissance Center for $626 million, and that it had paid $200 million for two other office buildings it had previously leased in nearby Pontiac. The company made the move despite its own financial problems, including a $3.3 billion first-quarter loss and continued weak U.S. auto sales.

In global trade, Asian markets finished mostly lower. Japan shares fell on Toyota's grim outlook issued after the market close there Thursday. European stocks tumbled in morning trading.