The Wall Street Journal-20080212-AIG- Microsoft Drop- GM- Yahoo Surge

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AIG, Microsoft Drop; GM, Yahoo Surge

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As stocks finished modestly higher, American International Group lost ground on worries about its credit-derivatives portfolio, Yahoo rose after turning down Microsoft and Darden Restaurants laid out an appetizing financial forecast.

AIG, a component of the Dow Jones Industrial Average, lost $5.94, or 12%, to $44.74. The financial-services company acknowledged that its credit-derivatives portfolio lost $4.88 billion in gross market value in October and November, more than four times the $1.15 billion executives had estimated in December.

The industrial average was propped up by General Motors, which rose 1.3, or 5%, to 27.12.

"AIG did not topple the financials, though they were a little bit lower," said Marc Pado, U.S. market strategist at Cantor Fitzgerald. "I think investors are looking beyond the current economic conditions and out to the future and seeing some positives there." Yesterday's gains also came despite a jump in oil prices.

"There is more confidence that eventually we will see the efforts -- the stimulus package and the [cuts in the] fed-funds rate -- have an effect," Mr. Pado said.

Shares of Salesforce.com rose 3.93, or 7.7%, to 54.80 after some blogs, including Silicon Valley Watcher, said the company had approached Oracle about a deal to buy Salesforce.com for $75 a share. But people familiar with the matter said the companies aren't in talks about a purchase. Representatives of Oracle and Salesforce.com declined to comment.

Yahoo (Nasdaq) gained 67 cents, or 2.3%, to 29.87, and Microsoft (Nasdaq) fell 35 cents, or 1.2%, to 28.21. The Internet company confirmed that it is rejecting Microsoft's unsolicited offer, now valued at about $41.6 billion, saying it substantially undervalues Yahoo.

Bank of America lost 2 cents to 42.14; Chevron gained 1.17, or 1.5%, to 80.43; Altria lost 67 cents to 72.42, and Honeywell lost 19 cents to 57.64. Dow Jones & Co., publisher of this newspaper and a unit of News Corp., announced that Bank of America and Chevron will replace Altria and Honeywell in its benchmark Dow Jones Industrial Average, effective Feb. 19.

Hasbro rose 54 cents, or 2.1%, to 26.41. The toy company said fourth-quarter net income rose 24% compared with a year earlier as revenue climbed.

Darden Restaurants gained 2.15, or 8%, to 29.01 after projecting fiscal third-quarter earnings above analysts' expectations amid positive same-store sales growth.

WebMD (Nasdaq) fell 3.27, or 10%, to 28.83. The provider of health- information services lowered its financial guidance for 2008. HLTH, WebMd's majority owner, said it hasn't been able to reach agreement with a special committee formed by WebMd's board on mutually acceptable terms for a merger and that it plans to continue negotiations for a short period of time.

Countrywide Financial gained 7 cents, or 1%, to 6.65. The financial- services company said it is expanding a program to help subprime borrowers avoid foreclosure.

Getty Images fell 2.45, or 9.2%, to 24.17. The auction of Getty Images appears to be in jeopardy, the New York Times reported, citing people briefed on the matter.

PNM Resources fell 4.73, or 25%, to 14.32. The energy holding company said its fourth-quarter net income was nearly half of what it was a year earlier.

Loews Corp. fell 3.73, or 8.3%, to 41; Carolina Group lost 3.66, or 4.5%, to 76.92; and CNA Financial lost 6.16, or 19%, to 26.07.

Loews posted a 31% drop in fourth-quarter net income, as the holding company was hurt by reduced investment income and weaker results at its subsidiary, Diamond Offshore Drilling.

Meanwhile, Carolina Group reported a 6.4% drop in fourth-quarter net income on a litigation charge, offset in part by a lower effective tax rate. Carolina Group is the tracking stock for Loews's cigarette subsidiary, Lorillard, which Loews plans to spin off as a separate, publicly traded company.

Fourth-quarter net income for CNA Financial was halved, largely due to net realized investment losses compared with prior-year gains amid decreased underwriting results in its standard and specialty coverage lines. Loews owns a majority stake in CNA, a commercial-insurance underwriter and property and casualty company.

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Lavonne Kuykendall, Donna Kardos, Vauhini Vara and Matthew Karnitschnig contributed to this article.