AIG Loss, Wal-Mart Cautious

123jump.com Staff
07 Aug, 2008
New York City

Stocks traded sharply lower after a loss at AIG, weak retail sales outlook and Toyota Motor and Allianz earnings drop. AIG, the largest insurer reported wider than expected loss and may be forced to raise capital as its portfolio losses mount. Earlier, Allianz SE, the largest insurer in Europe reported lower earnings on losses at its banking unit Dresdner Bank. Wal-Mart Stores fell after it offered a cautious outlook for August sales.

[R]10:15AM New York – U.S. stocks fell after a larger than expected loss at AIG and weak sales outlook from retailers.[/R]

The worries related to financial system resurfaced today after a sharp loss from AIG. The wider than expected loss from the insurer and weaker than expected earnings from Toyota Motor dragged market averages lower in the morning trading. Retailers declined after mixed same-store sales reports from several companies and weaker than expected outlook from Target and Wal-Mart Stores.

Separately, the Bank of England left its key interest rate unchanged.

AIG ((AIG)) dropped 16% or $4.63 after it reported a loss of $5.36 billion or $2.06 a share on continued write down in mortgage related assets. The wider than expected loss sparked fears that the insurer will need to raise more capital and more losses are likely in the next two quarters.

Wal-Mart Stores ((WMT)) dropped 3.3% or $1.97 to $58.80 after it reported same store sales rise of 3% in July and anticipated sales rise between 1% and 2% in August. The weaker than expected forecast dragged retailers lower.

Toyota Motor Corp ((TM)), the second largest automaker reported first quarter sales declined 4.7% to 6.22 trillion yen or $59.23 billion. Earnings dropped 28% to 353.7 billion yen or $3.18 billion compared to 491.5 billion yen. Earnings per share dropped to 112.28 yen per share compared to 153.89 yen a share on weaker sales in the U.S.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 129.90 or 0.98% to 13,124.99, Hang Seng index in Hong Kong increased 154.45 or 0.70% closed to 22,104.20. ASX 200 index in Australia increased 14.20 or 0.29% to close 4,983.30. The KL Composite index in Malaysia decreased 4.03 or 0.36% closed to 1,129.56.

The Kospi Index in South Korea decreased 14.71 or 0.93% to close at 1,564.00, SET index in Thailand closed higher 29.00 or 4.29% to 705.35 and JSE Index in Indonesia increased 11.81 or 0.54% to 2,199.01. The Sensex index in India increased 43.71 or 0.29% to 15,117.25.

Europe Markets Review

In London FTSE 100 Index traded higher 16.20 or 0.30% to 5,502.30, in Paris CAC 40 Index increased 48.26 or 1.08% to 4,496.59 and in Frankfurt DAX index traded higher 10.50 or 0.16% to 6,571.89. In Zurich trading SMI decreased 5.66 or 0.08% to 7,203.68.

Earnings Review

Blackboard Inc, educational software company said second quarter revenues rose 27% to $75.5 million from $59.4 million a year ago. Net income in the quarter fell 71% to $1 million or 3 cents per diluted share compared to net income of $3.4 million or 12 cents per share, a year ago.

Blackboard Inc ((BBBB)) in the last one year traded as high as $49.90 in October 2007 and as low as $26.83 in March 2008. Based on the yesterday’s closing price the company has a market cap of $1.23 billion.

Eagle Bulk Shipping Inc primarily engaged in the ocean transportation said second quarter revenues rose 31% to $37.2 million from $28.4 million a year ago. Net income in the quarter increased 25% to $14.9 million or 32 cents per diluted share compared to net income of $11.9 million or 29 cents per share, a year ago.

Eagle Bulk Shipping Inc ((EGLE)) in the last one year traded as high as $36.24 in October 2007 and as low as $17.50 in January 2008. Based on the yesterday’s closing price the company has a market cap of $1.29 billion.