Citigroup backed out of negotiations with federal regulators and Wells Fargo in its battle for Wachovia but vowed to have its day in court...

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Financial services

Citigroup backed out of negotiations with federal regulators and Wells Fargo in its battle for Wachovia but vowed to have its day in court.

Citigroup said it remains willing to complete its original deal with the Charlotte, N.C.-based bank. However, while it is seeking damages for breach of contract, it has decided not to challenge the Wells Fargo-Wachovia deal in court. That stance paves the way for Wells Fargo to close its $11.7 billion stock deal.

New York-based Citigroup said it has strong legal claims against Wachovia, Wells Fargo, and their officers and directors for breach of contract and plans to pursue its claims “vigorously.”

Federal Reserve officials had been working this week with Citigroup and Wells Fargo to try to reach a quick resolution and avoid a lengthy court battle. The negotiations centered on splitting up the bank between Citigroup and Wells Fargo.

Automotive

GM shares down to lowest in 58 years

Shares of General Motors lost nearly one-third of their value Thursday, plunging to their lowest level since July 1950 after Standard & Poor’s said the automaker’s credit could fall further into junk status due to the “rapidly weakening state” of the global automotive market.

GM shares plummeted $2.15, or 31.1 percent, to close at $4.76 after falling as low as $4.65. That low marked the automaker’s lowest trade since March 15, 1950, according to the Center for Research in Security Prices at the University of Chicago. The automaker’s shares are down 50 percent from their close of $9.45 at the end of last month.

Economy

Jobless claims fall from 7-year high

New applications for unemployment benefits dropped last week from a seven-year high, the Labor Department said Thursday, though they remain at elevated levels that indicate recession.

Initial claims for jobless benefits dropped 20,000 to a seasonally adjusted 478,000, the department said, the same level that Wall Street economists expected.

The department said hurricanes Ike and Gustav were responsible for adding about 20,000 claims on a seasonally adjusted basis. That’s down from approximately 45,000 the previous week.

Insurance

AIG to receive additional loan

Concerns about the health of American International Group (AIG) were renewed Thursday, a day after the insurance giant said it would receive an additional $37.8 billion loan from the Federal Reserve.

AIG is apparently facing a liquidity crunch greater than was anticipated a month ago when the U.S. government first bailed out the company.

The new loan is on top of a two-year, $85 billion loan AIG received last month from the Fed in an effort to stay in business. The new loan will help AIG cover requests from clients to redeem borrowed securities.

Technology

IBM profit up amid tech gloom

Even after IBM surprised Wall Street with a healthy profit in the third quarter and a reaffirmation of its earnings outlook for the rest of the year, the broader technology sector dived again Thursday. There’s just not enough of what lifted IBM to go around.

Tech stocks were pummeled Thursday, and IBM ended the day down as well. Analysts expressed fears that IBM could see trouble in the fourth quarter and into 2009 if the lending and spending climate worsens as expected.

Signs of weakness in the just-concluded third quarter could also emerge when IBM releases its full results for the period Oct. 16. The company announced more than a week early Wednesday that profit per share was 4 cents higher than Wall Street’s forecast, helped by an internal clampdown on spending.

“While the IBM announcement kind of soothed some nerves, I don’t think it calmed them completely because there’s still a lot of uncertainty out there about how long this credit crisis will play out,” said Rick Hanna, an equity analyst with Morningstar.

IBM shares fell $1.55, 1.7 percent, to close at $89, a 52-week low.

Compiled from The Associated Press