AIG and Oil Don't Mix for Market

Water and oil don't mix.  Apparently, as far as the market is concerned, neither do AIG and oil.

The futures market is signaling a noticeably lower open for the major indices, with the wheels of selling greased by oil topping $125 per barrel and Dow component AIG posting a $7.8 billion net loss for the first quarter and noting it is seeking to raise $12.5 billion in new capital.

AIG's news has prompted downgrades from the credit rating agencies and has renewed concerns about the longevity of the credit market mess.  AIG is indicated about 8% lower in premarket action.  It will be a major drag on the Dow and it is expected to weigh heavily on the broader market initially as other financial companies trade lower in response.

On a related note, Citigroup (C) will garner added attention today as it is holding a meeting with analysts and investors that, presumably, will shed added light on the bank's plans to cut costs and to deal with noncore assets.

In turn, the market is dealing this morning with the latest trade balance report that showed a $58.2 billion deficit for March.  That is an improvement from the $61.7 billion deficit reported for February and economists' consensus forecast of a $61.3 billion deficit.

The narrowing deficit will factor favorably into revisions for first quarter GDP.  Additionally, the trends in the data could well lead to an upward revision to our GDP forecast for the second quarter, which currently stands at 2.0%.

Despite the favorable economic implications provided by the March trade deficit, the market isn't paying much attention as there has been little change in the futures indication since the release.

--Patrick J. O'Hare, Briefing.com