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Stocks Close Lower on Record Oil, AIG Loss

Stocks closed lower Friday, weighed down by another record for oil prices and dismal results from insurance giant AIG.

The Dow Jones Industrial Average shed 0.9 percent during the session, and was off 2.4 percent for the week, snapping a three-week winning streak.

The Nasdaq and S&P 500 index finished the week down more than 1 percent and the CBOE Volatility index ticked back up 7 percent this week.

Crude oil marched above $125 -- and then $126 -- before the opening bell, and ultimately settled at $125.96 a barrel on the New York Mercantile Exchange.

Energy stocks, however, didn't follow crude's ascent amid concerns about margins.

"At some point oil gets too high for them to make money," Todd Leone, head of listed trading at Cowen & Co., told Reuters. "The higher crude goes, the harder it is to pass along higher prices to the consumer."

The S&P energy index finished down 0.7 percent, though ended the week up 3 percent, making it the biggest sector gainer for the week.

In economic news, the trade deficit narrowed to $58.21 billionin March from a revised $61.71 billion in February, the Commerce Department reported; economist had expected a gap of $61.9 billion. Imports fell by the largest amount in six years, reflecting the weak dollar.

"This is a consequence of the weaker dollar -- everybody's been expecting it," Jack Bouroudjian of Brewer Investment Group told CNBC. "You get the currency down to a certain level, eventually you see something happen with our trade deficit," Brewer said. "That's exactly what we want to see -- this is good news for the market, believe it or not."

As of Friday, Thomson Reuters is expecting a drop of 17 percent in first-quarter earnings. Financial firms are expected to post a 79-percent decline and consumer-discretionary companies are expected to log a 23-percent shortfall.

The biggest drag on the Dow was AIG, which declined 8.8 percent. The insurer late Thursday posted a loss of $7.81 billion, or $3.09 a share, for the quarter ended March 31. That followed a more than $5 billion loss in the final quarter of 2007. The company also said it will raise $12.5 billion in fresh capitalin the coming months to shore up its capital base.

Citigroup shares skidded 2.8 percent amid news that Citigroup, the biggest U.S. bank, plans to sell roughly $400 billion of extraneous assets over the next two to three years as part of its overhaul under new CEO Vikram Pandit. Today was Citi's annual meeting with analysts and investors.

Bad news came from the European financial sector as well, where Dresdner Bank posted an operating loss of 453 million euro ($694.4 million) after writing off 845 million euros for the value of structured finance products, marring gains from property and casualty insurance at parent Allianz.

Ford shares retreated 1.2 percent following news that billionaire investor Kerk Kerkorian has launched a tender offer to acquire 20 million more shares in the auto maker, which would raise his stake in the company to 5.5 percent.

Circuit City shares jumped 5.9 percent as the electronics retailer opened its books to Blockbuster and its largest shareholder, Carl Icahn, signaling its willingness to accept a takeover bid. (Though, the Circuit City board hasn't made a final decision.) The turning point, it seemed, was a letter from Icahn indicating that he would buy the company if Blockbuster can't finance the deal.

Nvidia rose 2.6 percent after several analysts raised their ratings on the stock to "buy." The chip maker missed forecasts but still posted an earnings gain of 33 percent. Analysts say demand for chips that go in mobile products make Nvidia an attractive buy.

Clear Channel Communications , embroiled in a private equity controversy, reported a profit excluding items of 19 cents, better than the 21 cents estimated by analysts surveyed by Reuters.

Marvel Entertainiment ticked up 1.6 percent after the comic-book icon announced an exclusive licensing agreement with THQ to develop videogames based on Marvel characters. Marvel Super Hero Squad videogames are expected to debut in fall 2009.

Send comments to cindy.perman@nbcuni.com.

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