UPI NewsTrack Business

Markets drop quickly Wednesday

NEW YORK, Jan. 14 (UPI) -- U.S. markets started sharply down Wednesday as retail sales in December fell and financial firms braced for more losses.

Retail dropped 2.7 percent in December, the U.S. Census Bureau said. After Citigroup's sale of about half of brokerage firm Smith Barney Tuesday, Deutsche Bank said it may lose $6.3 billion in the fourth quarter.

Morgan Stanley warned HSBC may need to raise as much as $30 billion, The Wall Street Journal reported.

In late-morning trading, the Dow Jones industrial average dropped 251.52 points, or 2.98 percent in to 8,197.04. The Standard & Poor's 500 fell 3.31 percent, 28.83 points, to 842.96. The Nasdaq composite index lost 48.05 points, 3.11 percent, to 1,498.41.

The benchmark 10-year U.S. Treasury bond rose 29/32 to yield 2.199 percent.

The euro fell to $1.3133, compared to Tuesday's $1.319. Against the Japanese yen, the dollar rose to 89.17 yen from Tuesday's 89.13 yen.

In Tokyo, the Nikkei average gained 24.54 points, 0.29 percent, to 8,438.45.

AIG sale a $308 million pittance

NEW YORK, Jan. 14 (UPI) -- U.S. insurance giant American International Group's sale of AIG Life Insurance of Canada is a small step in its recovery process, an analyst said.

AIG has used nearly $40 billion of its $60 billion federal line of credit, established when the company was near collapse last year. In addition, the government invested billions in the company in a rescue package worth $152.5 billion, The Washington Post reported Wednesday.

AIG Tuesday announced the sale of the life insurance company to BMO Financial Group for about $308 million.

It is the fifth sale of a subsidiary AIG has made to help repay the government, which now owns about 80 percent of the company.

But the recent deal "is really just a drop in the bucket," Rob Haines at CreditSights said.

AIG spokesman David Monfried said the "the big (AIG) assets … commanding in the tens of billions in some cases," will be up for sale "in the coming months."

Since accepting the bailout funds, AIG has sold five companies, raising at least $2.28 billion, the Post said.

It's a start. But, to repay its obligations to the government, "we're going to have to see much more than these little drips and drabs," Haines said.

Nortel telecom seeks bankruptcy protection

TORONTO, Jan. 14 (UPI) -- Canada's once-mighty Nortel Networks Corp. filed for bankruptcy protection in Delaware Wednesday and was set to do the same in Toronto.

The U.S. Chapter 11 filing came as $107 million in interest on debts came due, the Globe and Mail reported.

Nortel is North America's largest telecom equipment maker, but is likely to be broken up and sold to foreign rivals, sources told the newspaper after a board of directors meeting.

The company has an estimated $1 billion on hand, but $4.5-billion in long-term debt, the Canadian newspaper said. Court protection will give Nortel more leeway in selling or restructuring, the report said.

In 2000, Nortel had 95,000 employees and its shares were worth $1,231, but as of Tuesday, there were 26,000 staff and shares closed at 38.5 cents on the Toronto Stock Exchange, the Globe and Mail said.

The 114-year-old company was founded in Toronto as the Northern Electric Manufacturing Co.

Citigroup struggling in spite of bailout

NEW YORK, Jan. 14 (UPI) -- Citigroup Inc. is taking direction from "a new CEO," namely the U.S. government, as it seeks to sell various non-core businesses, one investor said.

The financial giant, having accepted cash infusions from the government of $25 billion and $27 billion, has "a new CEO … his name is Uncle Sam. He is an activist and he wants the company monetized," investor William Smith told The New York Times.

Citigroup arranged to sell a portion of its prized brokerage firm Smith Barney to Morgan Stanley for $2.7 billion Tuesday.

The company will keep 49 percent of the joint venture.

Sources said Federal Deposit Insurance Corp. Chairwoman Shela Bair directed the company to begin shedding non-core businesses in November. A spokesman for the FDIC said the matter would be considered confidential.

In spite of the bailout funds, Citigroup is expected to announce operating losses of $10 billion in the fourth quarter, the Times said.

A few on Wall Street wonder if the sale of Smith Barney will go far enough to get Citigroup out of trouble.

"They have moved the chips around, but it's the same game," said Meredith Whitney, an Oppenheimer banking analyst.

"They still have the same capital needs," Whitney said.