Wall Street stocks fell on Friday to
round out the worst week in three months as worries about high
oil prices hammered energy-sensitive sectors and left investors
on edge about inflation at the onset of a holiday weekend.
Economic bellwethers United Technologies (UTX.N) and
Caterpillar (CAT.N) were among the top drags on the Dow Jones
General Motors' (GM.N) shares fell to a 26-year low after
the company said strikes had reduced its earnings by a total of
Worries about the impact of high oil prices, which topped
$135 a barrel a day earlier, pressured stocks throughout the
week, stoking fears about inflation and weaker consumer
Higher oil pushed the American Stock Exchange index of
airline stocks (.XAL) down another 4.2 percent on Friday and a
20-percent drop on the week.
"Oil prices are what's driving us down again. As they just
continue to go higher and higher, that's putting pressure on
the economy, and as people think the economy is not going to do
so well, that's hurting stocks," said Giri Cherukuri, head
trader at OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average (.DJI) fell 145.99 points,
or 1.16 percent, to close at 12,479.63. The Standard & Poor's
500 Index (.SPX) slid 18.42 points, or 1.32 percent, to
1,375.93, while the Nasdaq Composite Index (.IXIC) ended down
19.91 points, or 0.81 percent, at 2,444.67.
For the week, the Dow fell 3.9 percent, the S&P 500 shed
3.5 percent and the Nasdaq dropped 3.3 percent. For all three
indexes, it was their worst weekly percentage drop in three
Since the start of the year oil prices have climbed by more
than 30 percent, sapping consumer spending on everything from
driving to shopping.
Data from a realtors group showed a decline in U.S.
existing home sales that was less than expected. But the report
gave a mixed picture, with inventories of unsold homes rising
10.5 percent last month.
Shares of American International Group Inc (AIG.N), the
world's largest insurer, fell 2.3 percent to $36.95. Moody's
Investors Service cut the company's credit rating, citing
losses from its exposure to the U.S. mortgage market and credit
GM shares were down 4.5 percent at $17.60, while United
Technologies' shares fell 2.6 percent to $70 and Caterpillar
shares slid 0.8 percent to $81.55.
Restaurant Cheesecake Factory (CAKE.O) fell 6.4 percent to
$19.53 and Darden Restaurants (DRI.N), the operator of the Red
Lobster chain, fell 4.4 percent to $31.74.
Takeover developments were a bright spot, as the Dow and
the Nasdaq were on track for their worst week in three months.
Belgian brewer InBev (INTB.BR) is working on a bid for U.S.
rival Anheuser-Busch Companies Inc (BUD.N), according to a
source familiar with the situation. Shares of the brewer of
Budweiser beer ended 7.7 percent higher at $56.61.
Trading volume was light on the New York Stock Exchange,
with about 1.1 billion shares changing hands, below last year's
estimated daily average of roughly 1.9 billion, while on
Nasdaq, about 1.69 billion shares traded, also short of last
year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by a ratio of
about 2 to 1 on the NYSE and Nasdaq.
(Editing by Gary Crosse)
Societe Generale (SOGN.PA) trader Jerome
Kerviel may have had internal help when he built up massive
stock market bets that led to the world's worst trading
scandal, a report published by the French bank said on Friday.
The report also blamed weak supervision and poor control
systems for the rogue trading scandal which shook the world's
banking establishment earlier this year.
The internal report said Kerviel, the junior trader blamed
by France's second-biggest bank for $7.7 billion in trading
losses, may have been helped by an assistant but added there
was no conclusive proof of this.
"We have discovered indications of internal collusion
involving a trading assistant, a middle office operational
agent," said the report.
"Due to the current on-going criminal investigation, we
have been unable to question this employee on this subject. The
possibility of such internal collusion must therefore be
confirmed by the courts," it added.
The bank has consistently said Kerviel acted alone.
The internal report, the second published by SocGen into
the debacle, said the unidentified assistant had manually
entered a large number of fraudulent transactions done by
It said the assistant registered "several abnormally high
intra-monthly provision flows, without having obtained any
valid explanations as to their validity."
It added that the assistant had registered a total of
almost 15 percent of Kerviel's fictitious trades.
On Jan 24, SocGen unveiled 4.9 billion euros ($7.7 billion)
of losses which it said were caused by rogue deals carried out
Kerviel was freed from prison in March after an appeal
against his detention but he remains under formal investigation
for breach of trust, computer abuse and falsification.
A previous report by SocGen had investigated how Kerviel
managed to build up a trading position of 50 billion euros -
more than the stock market value of SocGen -- without getting
noticed by his managers.
SocGen had highlighted Kerviel's habit of doing rogue deals
on warrants with a deferred start date, futures contracts and
"forwards" deals using a counterparty within SocGen itself.
The latest report on Friday said Kerviel's direct
supervisors lacked the relevant experience for their job.
"The direct supervisor lacked trading experience and was
not given a sufficient degree of support in his new role," it
The report also said Kerviel's supervisor "demonstrated an
inappropriate degree of tolerance in relation to the taking of
intraday directional positions."
It said both Kerviel's direct supervisor and the manager
above them carried out inadequate reviews of Kerviel's trading
activities. The report did not name these individuals.
SocGen did not find out about Kerviel's unauthorized trades
until January 18, even though internal reports from the bank
showed that Kerviel had in 2007 raised alarms with derivatives
exchange Eurex and been the subject of more than 70 "alert"
The bank's report said Eurex raised an alarm in November
when Kerviel bought 6,000 DAX share futures contracts worth 1.2
billion euros, betting on a broad rise in share prices, in just
The losses from the Kerviel scandal have made SocGen
vulnerable to a takeover bid and forced the bank to raise 5.5
billion euros in capital to shore up its finances.
French President Nicolas Sarkozy has also criticized
SocGen's executive chairman Daniel Bouton over the affair.
Bouton recently gave up his chief executive position to former
SocGen finance director Frederic Oudea.
SocGen shares closed down 1.5 percent at 66.75 euros,
giving the bank a stock market value of around 31 billion
(Editing by Sue Thomas)
General Motors Corp (GM.N) said on
Friday the just-ended strike at supplier American Axle &
Manufacturing Holdings Inc (AXL.N) and separate strikes by the
United Auto Workers at its own plants had reduced its earnings
by a total of $2.8 billion.
The total includes about $2 billion in lost earnings for
the second quarter because of an unplanned cut in production of
about 263,000 vehicles, including some 33,000 of GM's
better-selling sedans and crossovers.
In addition, GM said it had pledged $215 million to help
fund buyouts and cash "buydowns" in exchange for lower wages at
American Axle under a contract ratified on Thursday by the
supplier's union-represented workers.
The pressure on GM's cash position from the strikes and a
deteriorating U.S. sales market has emerged as a major concern
for investors in the No. 1 U.S. automaker. GM shares were down
more than 5 percent on Friday, near the low for the year.
GM said in a filing with securities regulators the strike
at American Axle had reduced its second-quarter production by
230,000 vehicles, equivalent to a $1.8 billion reduction in
The American Axle strike, which began in late February, cut
100,000 vehicles from GM's first quarter production schedule,
equivalent to $800 million in lost earnings, it previously
GM, like other major automakers, books revenue when
vehicles are assembled and shipped to dealers rather than when
they are sold to consumers. That means it faced immediate
losses on paper from the reduced production of even the
slow-selling trucks and SUVs because of the strike.
About 3,650 UAW-represented workers at American Axle voted
to ratify a concessionary contract on Thursday that cuts their
wages by more than a third and closes three facilities, ending
a strike that had idled about 30 GM plants in North America.
Most of the affected GM plants make slow-selling trucks and
SUVs, such as the Chevrolet Silverado and Chevrolet Tahoe.
GM said it planned to make up for only a fraction of the
lost production from the American Axle strike because of the
economic downturn and a market shift toward smaller and
fuel-efficient cars and crossovers.
At the same time, GM said it would make up for lost
production of better-selling sedans and crossovers such as the
Chevrolet Malibu sedan and the Buick Enclave.
The automaker said it had lost 33,000 units of production
of those vehicles in the second quarter when UAW-represented
factories in Michigan and Kansas making those vehicles went on
strike over now-settled, plant-specific contract terms.
GM's filing confirmed that the automaker had raised its
offer of financial support to American Axle in the final
negotiations aimed at reaching a settlement.
GM had said earlier it had agreed to offer $200 million. A
UAW official said earlier this week that GM's additional pledge
was earmarked to fund supplementary unemployment benefits at
The Detroit-based supplier has not commented on the impact
of the strike and settlement on its own finances. It said on
Friday it would hold a conference call for analysts next
Wednesday to discuss those issues for the first time.
GM shares were down more than 5 percent at $17.49 in
trading on the New York Stock Exchange. Shares of American Axle
were down 4.2 percent at $18.45.
(Reporting by Soyoung Kim, additional reporting by Nick
Zieminski New York; editing by Phil Berlowitz)