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Fast Money HomeFast Money Rapid RecapAbout Fast MoneyFast Money BiosFast Money Web ExtraFast Money Disclaimer
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Aug.07
9:18 PM ET
Thursday, 7 Aug 2008
Dow's Dismal Drop: AIG Decimates Financials, Wal-Mart Slows Retail
Posted By:Stan Yee

STOCKS FREEFALL AFTER MASSIVE AIG LOSS, POOR WAL-MART OUTLOOK, JOBLESS JUMP

"[The] stock market: a loser across the board. It was a loser early, it stayed a loser and became a bigger loser as the day went on," Dylan summed up Thursday's trading with that one statement, as AIG and Wal-mart lead the Dow's one-day, 225-point dive. A few lone tech stocks were the only winners in an otherwise distressed market. Adding to the bearish environment was the morning's new jobless claim numbers, the highest reported in several months.

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AIG POSTS BIGGEST LOSS IN 39 YEARS

AIG [AIG  Loading...      ()   ] was the big driver of the market mayhem, disappointing traders for the third time in a row with its outlook. It was hit with a $25B writedown and shed a remarkable FIFTH of its value today -- its biggest drop in nearly four decades.

Making matters worse, AIG couldn't promise a better outlook in the next quarter. It wasn't alone in bear territory, as financials in general continue to disappoint: Merrill [MER  Loading...      ()   ] dropped 8% and Lehman [LEH  Loading...      ()   ] posted a 12% loss.

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CITI SETTLES WITH FCC

Andrew Cuomo and the FCC this morning announced Citigroup [C  Loading...      ()   ] to be the first financial firm to reach a settlement regarding its sales of "auction rate securities," which were labeled "risk-free" but actually turned out to be "not-so-very" risk-free. Its settlement states Citi will buy back $7.5B of those securities and pay a $100M fine to settle regulatory claims. CNBC's Charles Gasparino claims other Wall Street firms are likely to follow, such as Merril.

Joe, who was "fired up" this morning, had bought oil yesterday, had his yen position in play and was actually looking to pick up AIG -- but by 8:30, he realized "the game was over." He got out of his oil position. Macke also was not expecting such a slaughter today, looking to Wal-mart as a well-loved name, "but it comes out miserable." He "ducked and covered" the rest of the day. Diane, who's been shorting financials, thinks some are still worth shorting, such as the Financial Select Sector SPDR [XLF  Loading...      ()   ]

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WAL-MART WARNING LEADS RETAIL RETREAT

July retail sales disappointed, led by Wal-Mart [WMT  Loading...      ()   ], which dropped more than analysts expeected, as did Target [TGT  Loading...      ()   ], Abercrombie & Fitch [ANF  Loading...      ()   ] and American Eagle Outfitters [AEO  Loading...      ()   ]. A&F's July numbers disappointed, but Karen feels the market over-reacted and that the stock will rebound.

Macke raises a flag with Target [TGT  Loading...      ()   ], saying it's been displaying very "un-Target-like" behavior, with its recent decline also.

There are still some suprises in the market: while retail in general performed poorly, department store chain JC Penney [JCP  Loading...      ()   ], on the other hand, announced better-than-expected earnings and raised.

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CRUDE RISES, AIRLINES SUFFER

Oil stopped its 3-day losing streak, rebounding 1.3%, leaving it back above $120. Joseph feels it's just short-covering causing the rebound.

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TOPPING THE TAPE: TECH
Tech looked "lovely" compared to financials today, with Intel [INTC  Loading...      ()   ], Microsoft [MSFT  Loading...