Corrected: AIG loss, oil, drug firms rattle investors : US Business

(Corrects 5th paragraph to show Citigroup shedding $400 billion of assets, not saving $400 billion)

By Jennifer Coogan

NEW YORK (Reuters) - Stocks fell on Friday after American International Group , the world's largest insurer, reported a record $7.8 billion quarterly loss, rekindling concerns about financial services companies.

Oil's price extended its record-breaking streak, rising above $126 a barrel and raising concern about higher inflation and slower economic growth.

Pharmaceutical company shares were a major drag after Mylan Inc reported a wider loss and revenue below analysts' forecasts and Bristol Myers Squibb Co fell on news that a generic version of blood-thinner Plavix may soon be approved in Europe.

AIG had to write down assets linked to subprime mortgages and said it would raise $12.5 billion in new capital to strengthen its balance sheet.

Another big financial company, Citigroup Inc , said it intends to shed roughly $400 billion of non-core assets in a bid to become more competitive.

The Dow Jones industrial average <.DJI> was down 109.99 points, or 0.85 percent, at 12,756.79. The Standard & Poor's 500 Index <.SPX> was down 11.17 points, or 0.80 percent, at 1,386.51. The Nasdaq Composite Index <.IXIC> was down 17.02 points, or 0.69 percent, at 2,434.22.

AIG shares were down 6 percent at $41.52.

Mylan stock fell 7.7 percent to $11.55, while Bristol Myers stock declined 3.9 percent to $21.90.

Energy stocks fell even though U.S. crude oil futures hit a record $126.20 a barrel.

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

Shares of Exxon Mobil fell 1.4 percent to $88.30. Chevron shares lost 0.9 percent to $96.52 on the NYSE.

(Editing by Kenneth Barry)

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