Wall Street falters with financials

NEW YORK - Stocks tumbled yesterday as further troubles in the financial sector, higher unemployment, and lackluster retail sales touched off fresh concerns about the economy.

Heading the list of worries, insurer American International Group Inc. reported a loss of more than $5 billion for the second quarter and the Labor Department said the number of newly laid-off people seeking jobless benefits last week jumped to its highest level in more than six years.

Meanwhile, an announcement by the credit-ratings agency Moody's Investors Service that it placed the long-term ratings of credit card lender American Express Co. on review for possible downgrade exacerbated fears.

The Dow fell 224.64, or 1.93 percent, to 11,431.43. The Standard & Poor's 500 index fell 23.12, or 1.79 percent, to 1,266.07, and the Nasdaq composite index fell 22.64, or 0.95 percent, to 2,355.73.

Oil prices rebounded yesterday, likely adding to Wall Street's downbeat mood. Light, sweet crude rose $1.44 to settle at $120.02 on the New York Mercantile Exchange.

The Labor Department said the number of newly laid-off people seeking jobless benefits increased by a seasonally adjusted 7,000 to 455,000 last week, the highest level since late March 2002. Wall Street had expected new claims to rise to about 430,000.

American International Group fell $5.25, or 18.05 percent, to $23.84 after the company reported its loss and said weakness in the credit markets had erased several billions of dollars in value from its credit default swaps portfolio and other investments.

Other insurers declined after AIG's report. Genworth Financial Inc. fell $1.62, or 9.94 percent, to $14.67.

American Express fell $1.59, or 4.19 percent, to $36.40 after the Moody's announcement.

Citigroup Inc. fell $1.23, or 6.24 percent, to $18.47 after federal and state regulators announced settlements yesterday in which the company will buy back more than $7 billion in auction-rate securities and pay $100 million in fines. The company neither acknowledged nor denied wrongdoing under the settlements.

Wal-Mart Stores Inc. said same-store sales, or stores open at least one year, rose 3 percent in July as consumers began using their government stimulus money. Analysts had expected a 3.4 percent rise, on average. Wal-Mart, also a Dow component, fell $3.80, or 6.25 percent, to $59.96.

Other retailers' reports disappointed Wall Street. Target Corp. fell $2.25, or 4.69 percent, to $45.76, while Macy's Inc. fell 76 cents, or 3.86 percent, to $18.92.