U.S. Stocks Drop As AIG Discloses Doubts About Portfolio
NEW YORK (MarketWatch) -- U.S. stocks dropped Monday, with the Dow industrials down about 100 points, after insurer American International Group Inc. pointed to potential trouble with the valuation of its credit-default swap portfolio, fueling new worries about the financial sector.
The Dow Jones Industrial Average fell 94.4 points to 12,087.7, with AIG leading the declines, its stock off 11.5%.
AIG disclosed the potential trouble with the valuation of its derivatives in an SEC filing earlier Monday.
Other blue-chip financials fell as well, with Citigroup Inc. off 2.2%; American Express Co. down 1.5% and J.P. Morgan Chase off 2%.
Ahead of the opening bell, Dow Jones & Co. disclosed plans to replace Dow industrials components Altria Group Inc. and Honeywell International Inc. with Bank of America Corp. and Chevron Corp. , effective Feb. 19.
A restructuring that will trim the size of Altria sparked the first changes in the 111-year-old stock index since April 8, 2004, with Bank of America and Chevron chosen because the financial sector and oil industries are currently under-represented on the index, the company said.
Shares of Altria fell 0.7%, and those of Honeywell were down 1.1%.
Bank of America's shares slipped 0.4%, while Chevron gained 0.6%.
The S&P 500 fell 9.18 points to 1,322.11 and the Nasdaq Composite declined 6.98 points to 2,297.87.
U.S. stocks closed with losses last week, hurt in particular by data showing a steep drop in services-sector output.
While there a number of economic reports out this week, there aren't any economic releases of significance to start the week.
On the New York Mercantile Exchange, crude oil futures fell 52 cents to stand at $91.25 a barrel, while gold futures fell 3 cents to $922 an ounce.
The dollar was on the back foot against a number of rivals on jitters about inflation in the euro area, the U.K. and Australia.
Yahoo rejected Microsoft's takeover bid as inadequate, while Microsoft is expected to take its offer directly to shareholders as its next move.
Motorola and Nortel Networks are in talks to merge their wireless-infrastructure businesses in a deal that could lead to the creation of a firm with $10 billion in annual sales, according to a Wall Street Journal report.
By Kate Gibson