Credit, energy costs weigh down market
Wall Street ended the week with a big decline as investors grappled with two of the biggest threats to the economy: fallout from turmoil in the credit market and surging energy prices. All three major indexes suffered losses for the week. Insurer American International Group Inc. helped send the Dow Jones industrial average down about 120 points after posting a wider than expected first- quarter loss that rekindled anxiety about the strained state of the global financial system. AIG reported it lost $7.81 billion -- its second-straight quarterly loss -- and revealed plans to raise $12.5 billion in the coming months. The world's largest insurer, like many of its peers in the financial services sector, has seen its investments in the credit markets plunge in value. Meanwhile, rising crude oil prices remained a source of worry for investors, as they had much of the week and in recent months. Oil futures rose above $126 a barrel for the first time, further stoking concerns about inflation that could curtail consumer spending.
Circuit City for sale
Circuit City Stores Inc. on Friday gave in to pressure from activist shareholders, essentially putting itself up for sale and agreeing to nominate dissident directors to its board. The electronics retailer announced it would open its books to Blockbuster Inc. and Blockbuster's largest shareholder, Carl Icahn. It did so after Icahn defused concerns over whether Blockbuster could finance the deal by saying he was prepared to buy the company if all else fails. The video-rental chain's takeover bid of just over $1 billion is aimed at creating a huge chain that would sell electronic gadgets and rent movies and games.
Citigroup plans to get smaller
Citigroup Inc.'s new chief executive, Vikram Pandit, plans to stick with a global banking model after months of intense review -- but only after shrinking the company by about one-fifth first. The three-year game plan, revealed Friday, includes getting rid of more businesses, mortgages, real estate operations and jobs. The bank aims to shed $400 billion to $500 billion of its $2.2 trillion in assets and grow revenue by 9 percent over the next few years as it tries to rebound from huge losses tied to deterioration in the credit markets.