Brazilian Air, GOL Down 8%

123jump.com Staff
17 May, 2006
New York City

Brazil economic expansion has fueled rise of stock market in the last three years. The air transportation has been growing at one of the fastest pace in the world as commodity price driven economic expansion has supported a rise in air travel demand. Demise of former air travel leader Varig has given rise of TAM and GOL airlines. Both airlies has used stock market listings to fund expansion in the domestic and international markets.

[R]3:30PM Brazilian airline GOL loses 8% in altitude.[/R]
GOL Linhas Aeras Inteligentes S.A. ((GOL)), a low-cost airline operating in Brazil, shares fell after the company filed registration statements for a number of stock and bond offerings. The company has announced plans to sell 2.5 million shares in addition to to a secondary of 10 million preferred shares by ASAS Investment Fund. GOL also filed to sell a total of $100 million worth of debentures which will include an over-allotment option to sell an additional $15 million in notes. The company has additionally filed a registration statement for a proposed international offering of convertible notes due in 2026 and a registration statement with the CVM for a proposed Brazilian offering of convertible debentures due 2026. The total amount of these offerings will be approximately $100 million. It also expects to grant underwriters an option to purchase up to an additional US $15 million principal amount of convertible notes and debentures to cover over-allotments, if any. The company intends to use the net proceeds to cover the costs of acquiring aircraft, equipment, and materials. GOL airline stock is currently down 8.41%.

[R]3:00PM Carnival Corp shares are down amid cuts in its 2006 earnings outlook.[/R]
Carnival Corp ((CCL)) shares are down 3.09% as brokers lowered price targets after news the company cut its 2006 earnings outlook. The 2006 earnings are now expected to range $2.65 to $2.75. The company expects 2006 Q2 earnings of 43 cents to 45 cents per share.

Abercrombie & Fitch ((ANF)), a specialty clothing, accessory, and personal care retailer, reported its net income jumped to 62 cents a share vs. 45 cents a share in the year-earlier period. The company now expects earnings $1.28 to $1.33 a share for the first half of fiscal 2006. The projected earnings are up from previous forecasts of $1.23 to $1.28 a share. Sales jumped 20% to $657.3 million vs. last year’s $546.8 million. Outlets open more than a year had a 6% rise in sales.

Circuit City ((CC)) increased its projected outlook of net sales growth of 7% to 11% in fiscal 2007. Analysts estimate web-originating sales of up to $1 billion. Analysts on average expected profits ranging from a loss of 1 cent to a profit 4 cents with a consensus estimate of a profit of 1 cent. The stock is currently up 4.77%.

Zale Corp. ((ZLC)), a fine jewelry retailer, reported earnings of 35 cents a share up from 28 cents a share in the year-earlier period. The company’s revenue rose 2.2% to $526.9 million. Analysts currently expect earnings of 7 cents a share.

GOL Linhas Aeras Inteligentes S.A. ((GOL)), a low-cost airline operating in Brazil, shares fell after the company filed registration statements for a number of stock and bond offerings. The company intends to use the net proceeds to cover the costs of acquiring aircraft, equipment, and materials. GOL’s stock is currently down 8.41%.

[R]2:30PM Widely held indexes Dow, Nasdaq and S&P 500 decline more than 1.5%[/R]
Market averages tumbled under the weight of inflation fears. Dow traded more than 200 points lower, Nasdaq has lost 27 points and S&P lost 19 points with only 120 minutes of trading left. Financial services, industrials and tech stocks led the decliners. Metals, crude oil and dollar came under pressure. Crude declined on rising inventory supply data and metal market maintained its recent slide. Consumer prices rose 0.6% in April and core inflation was reported to jump at 0.3% after rising 0.3% in March. Market was rattled with the prospect of rising interest rate to stem higher inflation. Commodities price inflation is steadily seeping into the broader economy as industry after industry pass along the rising energy cost. Railroads, airlines and truck transportation companies have passed these charges along as fuel surcharges. Utility companies have also requested steep hike in rates.

[R]12:30PM European markets drown in the red.[/R]
European markets tumbled in afternoon trading, following a downbeat U.S. economy report. Market averages erased earlier gains to close deeply in the red after stronger-than-expected data on consumer prices raised concerns about inflation and further increases of interest rates. The German DAX 30 slipped 3.4%, the French CAC 40 tumbled 3w.2%, and London FTSE 100 dropped 2.9%. The British pound climbed to $1.9025 from $1.8859, reflecting speculations that the Bank of England will raise interest rates.

Crude oil prices dropped below $69 on rising gasoline stockpiles. Light sweet crude June delivery fell $1.33 to $68.20 a barrel. Gasoline dipped 5 cents to $1.97 a gallon. Natural gas fell 7 cents to $6.80 per 1,000 cubic feet. European gold advanced. In London the precious metal rose to $696 per troy ounce, up from $687. In Zurich gold gained to $696.70, up from $688.75. Silver closed unchanged at $13.30. The U.S. dollar traded mixed in European trading. The euro traded at $1.2793, down from %1.2853. The dollar bought 109.69 yen, down from 109.72. The British pound was quoted at $1.8865, down from $1.8876.


[R]11:30AM Inflation weighed on market sentiment.[/R]
Stocks traded weak as investors worried about the pace of inflation after a report on producer prices was released. The data showed that consumer prices rose at their fastest pace in three months due to a significant increase in energy prices. Excluding food and energy prices, prices exceeded expectations, raising concerns about the pace of inflation. The three major averages moved notably lower with the Nasdaq falling to a four-month low.

The Labor Department''s report on April consumer prices raised concerns about the outlook for interest rates, sending brokerage stocks notably down. The Amex Securities Broker/Dealer Index dropped 1.9%. The concerns about higher interest rates also contributed to significant weakness among housing stocks. The Philadelphia Housing Sector Index fell 1.4%. Networking stocks posted considerable weakness, as reflected by the 1.1% loss shown by the Amex Networking Index. Tellabs ((TLAB)), telecom equipment maker, dropped 3.3%, leading the sector down. Some defense, transportation, and telecommunications stocks also posted notable losses. Dow component Boeing ((BA)) posted a 2.3 % loss. Meanwhile, gold stocks advanced along with June delivery prices which reached $698 per ounce. The Amex Gold Bugs Index gained 1%.

[R}Crude oil inventories declined, while gasoline advanced.[/R]
Crude oil inventories ticked down in the latest week, according to government statistics released Wednesday. The slide followed 2 weeks of inventory builds and was not enough to fully reverse the previous week''s mild gain. Meanwhile, stocks of gasoline pushed higher, building on the prior week''s advance. The Department of Energy''s Energy Information Administration revealed that crude oil inventories fell by 100,000 barrels for the week ended May 12. Specifically, the measure slipped to 346.9 million barrels from the prior week''s level of 347 million barrels. The move in the latest period reversed a portion of the previous week''s gain of 300,000 barrels. That advance was preceded by a gain of 1.7 million barrels in the prior week and a slide of 200,000 barrels in the week before that. In the most recent week, oil inventories were 4.7% higher than their levels of the same time last year. Gasoline inventories posted a week-over-week advance of 1.3 million barrels, the government said. This followed an advance of 2.4 million barrels in the previous week. In the latest period, gasoline stocks were 3.5% below their levels of last year. Inventories of distillate fuel oil recorded a slight decline in the most recent week, ticking down by 100,000 barrels. This followed an advance of 200,000 barrels in the previous week.


[R]10:00AM Stocks opened in the negative on inflation worries.[/R]
U.S. stocks came under pressure at opening as downbeat consumer prices report outweighed robust profit growth for Hewlett-Packard. The economic data raised concerns about inflation and interest-rate increases as the Labor Department posted a bigger-than expected-increase in core consumer prices, rising by 0.3% in April, above economist estimates of an increase of 0.2%.Following the report, rate-sensitive utilities and banking stocks moved to the down side, contributing to the weakness shown by the broader markets. Bank of America Corp. ((BAC)) fell 1%, while JPMorgan Chase & Co. ((JPM)) lost 1.3% on the Nymex.

In corporate news, Hewlett-Packard Co. ((HPQ)) the No. 2 computer maker, was the sole gainer in the Dow industrials. The company’s shares advanced 4% after it posted 51% jump in quarterly profit. Applied Materials ((AMAT)) fell 1.5% after reporting higher quarterly profit, but disappointing outlook. In the first hour of trading, the Dow Jones industrial average fell 67.56, or 0.59%.The Standard & Poor''s 500 index was down 6.31, or 0.49%, and the Nasdaq composite index dropped 10.80, or 0.48%. Worries about higher interest rates weighed on bonds. The 10-year Treasury note climbed to 5.16% from 5.1% late Tuesday.


[R] 9:00AM Stock futures were set to open flat on inflation data.[/R]
U.S. stock futures pointed to a flat start of Wednesday session, with investors digesting consumer prices data, giving an indication about the pace of inflation. The Labor Department reported that prices rose in line with economist estimates, with consumer price index rising 0.6% in April following a 0.4% increase in March.

Tech stocks are expected to be in focus today as Hewlett-Packard reported 51% profit growth in Q2 on sales of more profitable types of PCs and printers and from stealing market share from its biggest rival in PCs. The company posted profit of $1.46 billion, or 51 cents a share, compared with $966 million, or 33 cents per share last year. Sales rose 5% to $22.6 billion from $21.6 billion last year. Excluding one-time expenses, the company earned $1.6 billion, or 54 cents per share, compared with a profit of $1.1 billion, or 37 cents per share, in the same period last year. Applied Materials Inc. reported a higher quarterly profit, citing revenue jump on demand for consumer electronics, such as digital music players and cell phones. A disappointing outlook dragged its shares down 3.4% to $17.25 on Inet. S&P 500 futures were up 1.8 points, just above fair value. Dow Jones industrial average futures rose 20 points, and Nasdaq 100 futures rose 4.75 points.

[R]Consumer prices rose in line with expectations.[/R]
The Department of Labor released its closely watched report on consumer prices in the month of April on Wednesday, showing that prices rose in line with economist estimates. At the same time, core prices rose more than expected. The Labor Department said that its consumer price index rose 0.6 percent in April following a 0.4 percent increase in March. The increase by the index came in line with economist estimates of a 0.6 percent increase. The acceleration in the pace of price growth compared to the previous month came as energy prices surged up 3.9 percent in April after rising 1.3 percent in March. The increase in energy prices also contributed to a 2.4 percent increase in transportation prices. The report also showed that the core consumer price index, which excludes food and energy prices, rose 0.3 percent for the second consecutive month. Economists had expected a more modest increase of about 0.2 percent.

Zale Corp ((ZLC)), fine jewelry retailer, reported Q3 net income advanced to 35 cents a share, up from 28 cents a share in the year earlier period. If not for items, net income was 24 cents a share. Revenue advanced 2.2% to $526.9 million. The company beat analysts’ estimates for net income of 21 cents a share.

Charming Shoppes Inc, ((CHRS)), retailer of women''s plus-size apparel, reported Q1 net income advanced 7% to 24 cents a share, up a penny from 23 cents in the year-ago period on 22% higher sales, matching analysts’ estimate. Sales advanced to $734.9 million from $603.3 million.

Retalix, ((RTLX)), enterprise-solutions provider, posted Q1 profit decrease of 35% to 8 cents a share, from a year ago on a higher tax rate despite 50% revenue growth to $50.7 million. The company added it expects its effective tax rate to decline at least to its normal rate in the Q2.

The Talbots Inc, ((TLB)), specialty apparel retailer, reported Q1 earnings of 51 cents a share, down from a profit of 63 cents a share year-ago. Q1 includes stock option expensing of 3 cents a share. Sales rose 1% in Q1 to $453 million from $446.5 million in the same period a year ago and same-store sales advanced 0.9% in the quarter. The company matched analysts estimate.

FirstService Corp, ((FSRV)), property and business services provider, reported Q4 net income advanced to $1.18 a share, from a loss of 4 cents a share in the year-earlier period. Adjusted net income advanced to 6 cents a share from a loss of 3 cents a share. Earnings from continuing operations gained a penny a share from a loss of 11 cents a share. Revenue rose 24%. The company topped analysts’ views for earnings of 6 cents a share.

Too Inc, ((TOO)), specialty retailer, reported Q1 earnings of 35 cents a share, up from a profit of 21 cents a share a year-ago. Sales advanced 19% in Q1 to $195.1 million from $164 million in the same period a year ago with same-store sales gaining 10%. The company attributed the earnings rise to the same-store sales improvement and a reduction in general, administrative and store operating expenses stemming from elimination of the company''s Limited Too spring television advertising.


[R]8:00AM Honda Motor plans to further expand car production in North America.[/R]
Honda Motor Co. announced plans to build a new plant in the United States in order to meet growing demand for its cars. The construction of a new assembly factory in Japan and an engine plant in Canada is also part of the $1.18 billion expansion plan. The three plants are aimed at meeting 34% increase in annual sales to 4.5 million vehicles a year by 2010. In addition to the new plants, the company will double vehicle production at its plant in Brazil to 100,000 units by 2008, and double output in India to 100,000 by 2007.

Honda already has two plants in Ohio, a factory in Alabama, and a plant each in Canada and Mexico.The sixth car factory in North America, worth $400 million, would employ 1,500 workers and produce about 200,000 vehicles a year when it was completed in 2008. Honda President said that a location for the plant hadn’t been selected yet but the company was in the final stage of finding one. The new plant would boost the company''s North American production capacity from 1.4 million to 1.6 million vehicles. Information on what vehicles the new U.S. plant would produce was not officially released, but most likely the new facility will roll out models as the Civic, and the Fit, a small, five-door model that had been exported from Japan. Honda will also start designing a cleaner next-generation four-cylinder diesel engine that will produce less noise. It envisions selling the new super-clean engines within the next three years.

Last month, the company reported a record quarterly profit of 219.5 billion yen ($1.9 billion) in the first quarter, more than double its income from a year ago. Honda''s shares, which have risen about 14% in 2006, gained 0.78% in Tokyo trading.


[R]7:30 AM Asian markets rebound following U.S data and investors rally.[/R]
Asian markets closed higher. Japan''s Nikkei index advanced 0.2%, breaking six consecutive session of losses to close at 16,307.67. U.S. producer price index data showed that energy prices have not impacted inflation as it had been expected. Less inflation translates as less pressure on the dollar which is good news for exporters. Industrial and machinery stocks led the gainers in Tokyo Wednesday. Shikawajima-Harima Heavy Industries advanced 3.23%, and Mitsubishi Heavy Industries gained 4.1%. Exporters were also among the top performers. Nikon advanced 6.26%, Konica Minolta gained 1.95% and Canon was up 1.23%. Automotive stocks also advanced. Toyota Motor was traded 1.13% higher and Honda Motor rose 0.78% in the wake of its proposed plans to spend $1.2 billion on the construction of new factories in Canada. Hang Seng''s top stock, HSBC Holdings, also advanced 2.91% while chip-maker Hynix Semiconductor of South Korea was up 5.18%. Samsung Electronics advanced as much as 1.87%. Singapore''s Straits Times Index rose 1.39%, and Taiwan''s Weighted Average advanced 0.66%.

[R]6:30 AM Early European trade gains on earnings and mining stocks.[/R]
European markets traded higher Wednesday morning as equity markets gained on strong advances in Asia, the optimistic earnings reports and upbeat mining stocks. Vivendi, the French media group, continued repel moves at breaking up the company, releasing robust earnings outlook. Its shares were up 4.9%.London-listed miners also gained. Antofagasta advanced 3.2%, while BHP Billiton rose 1.9%. Tesco, the UK’s retailer, advanced 1.1%, while France’s Credit Agricole lost 0.8%.

Light crude oil gained 19 cents at $69.72 a barrel by 0713 GMT after gaining a humble 12 cents on Tuesday. London Brent for July delivery advanced 20 cents at $70.28. Gold for June delivery rose $19.80 to $712.70 an ounce, thanks to stronger-than-expected open on the Tokyo Commodity Exchange. The euro was traded at $1.2863, up from $1.2853 in New York late Tuesday, while the British pound advanced to $1.8908 from $1.8876. The dollar bought 109.17 yen.