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US midday: Decline picks up pace

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Date: Friday 09 May 2008

LONDON (ShareCast) - The Dow Jones index is now showing a triple digit fall as US stocks continue yesterday’s slide.

Sentiment is soured by AIG’s announcement of plans to raise $12.5bn to repair its balance sheet after taking substantial write-downs in the first quarter.

Insurance giant AIG posted first-quarter losses of $7.81bn late yesterday and said in a conference call that it could offer “no assurance” that further write-offs are not around the corner. The stock is one of today’s biggest fallers.

On the upside, the US trade deficit contracted more than expected, as US consumers tightened their belts and spurned imported goods. The deficit narrowed to $58.2bn in March from $61.7bn, although it was not all good news, as exports showed a monthly decline for the first time in a year.

The Dow Jones 30 is down 112 at 12,753 and the S&P 500 is 11 points easier at 1,386. The tech-heavy NASDAQ Composite is outperforming the other two major indices but is still down 11 at 2,439.

Soaring oil prices, which are currently well past $125 a barrel as the weaker dollar pushes investors to buy commodities, do no favours to big fuel users such as Delta Air Lines and cruise company Carnival.

Oil refiners are also on the skids, with Tesoro and Valero Energy leading the way down, after Goldman Sachs said refiners are facing liquidity issues.

Generic drug company Mylan is friendless after it reported increased first quarter losses of $443.9m, compared with losses of $71.3m in the first quarter of the previous year.

Citigroup eased after announcing plans to run down about $400bn of assets as it seeks to claw its way back to profitability.

Computer graphics chip designer Nvidia races ahead after yesterday’s announcement of a 34% rise in first quarter profits.

Circuit City Stores has agreed to open its books to DVD-rental company Blockbuster and billionaire financier Carl Icahn, effectively putting itself up for sale. Fellow consumer electronics retailer Radio Shack gravitates higher in sympathy.

In other company news, General Motors said in a regulatory filing that it would give financial support to end the strike at auto parts supplier American Axle and Manufacturing Holdings.