Stocks Fall on Poor Earnings, Oil Prices

Stocks fell Friday as the U.S. trade deficit narrowed; the world's largest insurer, AIG (AIG), reported a $7.8 billion loss; and oil once again traded at record levels.

Also, Citigroup (C) said it plans to sell about $400 billion of "non-core assets," about 22% of total assets, over the next several years. Chief executive Vikram Pandit says the sales will improve the quality of Citi's earnings.

The U.S. trade deficit narrowed 5.7% to $58.2 billion in March, from $61.7 billion in February. Imports fell 2.9% and exports fell 1.7%, while the trade deficit with China narrowed to $16.1 billion, from $18.4 billion the month before. "The data are better than expected and should give some support to the dollar," Action Economics says.

AIG plans to raise about $12.5 billion in capital to replenish a balance sheet damaged by the recent credit crisis. The insurance firm reported a loss of $1.41 per share, vs. earnings of $1.68 per share a year ago. Net premiums written were flat.

Oil continued its rapid, record-breaking ascent, pushed higher by worries about violence in Nigeria and rising tensions between the U.S. and Venezuela. On the NYMEX, crude oil for June delivery was trading $2.27 higher at $125.96 per barrel.

On Friday, the Dow Jones industrial average dropped 120.90 points, or 0.94%, to 12,745.88. The broader S&P 500 index lost 9.4 points, or 0.67%, to 1,388.28. The tech-heavy Nasdaq composite index shed 5.72 points, or 0.23%, to 2,445.52.

On the New York Stock Exchange, 16 stocks fell for every 14 in positive territory. On the Nasdaq, the ratio was 15 to 13 negative.

The trade figures, along with construction spending, wholesale inventories, and factory inventories, suggest that first-quarter GDP to be upwardly revised to 0.9% from the originally reported 0.6% increase, John Ryding, chief U.S. economist at Bear, Stearns & Co., wrote Friday. Later in the second quarter, however, he said he expects the trade deficit will widen "since the tax rebate checks should cause a pick up in import growth to the extent that they boost consumer spending."

Next week, the market will closely watch new data for more clues to the state the economy. On Tuesday, data on import prices, retail sales and business inventories arrive. Inflation-watchers are waiting for Wednesday's consumer price data. Jobless claims numbers are released on Thursday, and Friday brings April housing starts and a first look at the May Reuters/University of Michigan Consumer Sentiment index.

Among other stocks in the news Friday, Priceline.com (PCLN) posted earnings of 37 cents per share, vs. a 44-cents loss a year ago, as revenue rose 34%. Piper Jaffray analysts raised their target price for the stock.

Harris Corp. (HRS) is reportedly considering putting itself up for sale. The Wall Street Journal says the electronics and defense firm is still early in the process.

Leap Wireless International (LEAP) reported a 27-cents per share loss, vs. a 36-cents loss a year ago, as revenue rose 19%.

Clear Channel Communications (CCU) posted earnings of 32 cents per share, vs. 19 cents a year ago, as revenue rose 3.9%.

Major European indexes were lower Friday. In London, the FTSE 100 index lost 1.05% to trade at 6,204.70. In Paris, the CAC 40 index fell 1.88% to 4,960.56, and Germany's DAX index dropped 0.97% to 7,003.17.

In Asia, Japan's Nikkei 225 lost 2.06% to 13,655.34, and Hong Kong's Hang Seng index fell 1.52% to 25,063.17.

Treasury market

Treasury prices were flat on Friday. The ten-year note was unchanged at 100-26/32 for a yield of 3.78%, while the the 30-year bond rose just 09/32 to 97-18/32 for a yield of 4.52%.