Airline Stocks Move Lower

Elena
22 Jun, 2006
New York City

Stocks opened dslightly lower as some negative news on one of Johnson & Johnson''''s product lines offset optimism about better-than-expected company earnings. Company''''''''s shares fell 1.1%. The airline sector declined on news that the U.K. Office of Fair Trade and the U.S. Department of Justice are probing the airline over ticket prices and fuel surcharges. British Airways dropped 5% in London.

[R]9:45AM Stocks opened in the negative.[/R]
Stocks started below the flat line Thursday, reflecting cautiousness ahead of Fed Reserve meeting and higher oil prices. A slight rise in weekly unemployment claims drew little reaction from investors. The Labor Department said the number of jobless claims filed grew by 11,000 to 308,000 last week, just beating economists' estimate of 305,000. The airline sector dropped on news that British and U.S. regulators are probing several carriers over ticket prices and fuel surcharges. British Airways PLC fell $4.51 to $63.28, and United Airlines parent UAL Corp. lost 38 cents to $31.87. Bed Bath & Beyond Inc. dropped $2.09 to $34.83 after the home retailer issued a weak full-year earnings outlook. In the first hour of trading, the Dow Jones industrial average fell 26.24, or 0.24%. The Standard & Poor's 500 index was down 3.48, or 0.28%, and the Nasdaq composite index lost 6.62, or 0.31%. Bond yields remained inverted as prices fell. The yield on the 10-year Treasury note edged up to 5.17% from 5.16% late Wednesday, while the 2-year yield steadied at 5.2%.


[R]9:00AM Stock futures pointed to a roughly flat opening.[/R]
Stock futures indicated flat to higher opening Thursday, with trading expected to be lackluster due to the lack of significant news and traders looking ahead to next week''s Federal Reserve meeting. Economic data may attract some attention, as the Labor Department released its report on initial jobless claims, which showed that jobless claims rose a little more than economists had expected. In corporate news, shares of Allianz ((AZ)) are expected to see trading activity as the insurer said it is planning to cut 7,480 jobs due to the restructuring and modernization of its Dresdner Bank AG and Allianz Deutschland AG. Family Dollar ((FDO)) gained 2.4% in pre-market trading after the company reported better-than-expected Q3 earnings and raised its full year earnings forecast.

[R]Initial jobless claims rose slightly above estimates.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended June 17. The report showed that jobless claims rose a little more than economists had expected. The Labor Department said that jobless claims rose to 308,000 from the previous week''s revised figure of 297,000. Economists had expected jobless claims to increase to 305,000 compared to the 295,000 originally reported for the previous week. The report also showed that the four-week moving average fell to 311,250 from the previous week''s revised average of 316,250. With the decrease, the less volatile moving average fell for the third consecutive week. The Labor Department added that continuing claims in the week ended June 10 rose to 2.439 million from the preceding week''s revised level of 2.421 million.

Family Dollar Stores Inc, ((FDO)), discount retailer, reported that Q3 income advanced to 37 cents a share, from 32 cents in the year-ago period. Sales increased to $1.57 billion from $1.43 billion in last year''s Q3. The company topped analysts’ forecasts for earnings of 35 cents a share. forecast earnings of 19 cents to 22 cents a share. Analysts'' estimate stands at 20 cents.

Rite Aid Corp, ((RAD)), drugstore operator, reported that Q1 income dropped to 1 cent a share, much lower than 5 cents a year ago despite revenue growth and same-store sales growth. The company missed analysts’ forecasts for earnings of 3 cents a share. For fiscal 2007, company reaffirmed its outlook for earnings of 2 cents a share to a loss of 7 cents.

Del Monte Foods Co, ((DLM)), packaged foods company, reported that Q4 net income advanced to 29 cents a share, from 9 cents a year earlier. Earnings from continuing operations were 21 cents a share and sales advanced to $799.2 million from $774.4 million in last year''s Q4. The company topped analysts’ forecasts for earnings of 20 cents a share. The company also announced a transformation plan that includes the elimination of management layers. Del Monte anticipates to incur pre-tax charges of about $110 million over the next two years from the plan, but also expects higher long-term growth because of costs savings. For the first quarter, Del Monte forecast earnings per share to be flat to a loss of 4 cents.

Gerber Scientific Inc., ((GRB)), apparel and flexible materials company, reported Q4 net income of 17 cents a share. Results were hurt by a charge of 2 cents a share related to the adoption of accounting for contingent asset retirement obligations. Revenue came to $143.1 million. The company did not provide year-ago results. The company topped analysts’ expectation for earning of 11 cents a share. The company added that incorrect accounting for its non-qualified supplemental pension plan may have resulted in an understatement of previously reported expenses during fiscal 1994 through fiscal 2005, net of income taxes, of about $800,000 to $1.5 million.

[R]8:00AM BA investigated for alleged price-fixing.[/R]
British and U.S. agencies are reportedly investigating alleged price-fixing by British Airways and other airlines on passenger fares and fuel surcharges. BA said it was assisting the Office of Fair Trading and the U.S. Department of Justice with the investigations, with Virgin Atlantic and American Airlines also cooperating with the investigation. BA shares tumbled following the announcement, and were down 4.9% at 349.75 pence in midmorning trading on the LSE.

American Airlines said that it ‘has received a United States federal grand jury subpoena in connection with a government investigation into alleged price fixing in the air passenger industry.'' Eight other airlines, Ryanair, bmi, Continental, Lufthansa, Finnair, KLM, Icelandair and SAS, said they were not being investigated. But SAS AB''s SAS Cargo in Copenhagen, Denmark, said the EU alleged that cooperation among airlines began in 2000 and involved agreements about surcharges imposed by airlines to offset certain external costs. SAS said the costs included surcharges on fuel, added security after the Sept. 11, 2001, attacks in the U.S., and premiums for war-risk insurance after the start of the war in Iraq.


[R]7:15AM Asian stocks finish higher on Japan’s trade data and overseas gains.[/R]
Asian markets closed higher. The Nikkei 225 Average closed up 3.36% to 15,135.69, making its first break above the 15,000 level in two weeks. Sentiment was upbeat on the release of the economy ministry''s all-industries index, which advanced 1.3% in April from March, the first gain in three months. Camera maker Canon gained 3%. Consumer electronics company Sony climbed 2.3%. Chip-equipment maker Kyocera surged 4.6% and Toshiba Corp. added 2.8%, advancing as the electronics maker gave a press briefing late in the day to launch its next-generation, high-definition optical disc recorder. In Hong Kong, shares followed the regional trend. The Hang Seng Index advanced 1.1% to 15826.70, as some investors considered a global correction based on concerns over rising U.S. interest rates and inflation had been overstated. Taiwan shares also finished higher as strength in U.S. markets overnight sparked bargain hunting on the local exchange. The Weighted Price Index of the Taiwan Stock Exchange gained 185.56 points, or 2.9%, to 6485.15, bouncing back from a six-month low Wednesday, when it shed 1%.Construction companies led Thursday''s gainers, advancing 5.2% overall, followed by electronics firms, which accounted for 73% of volume and advanced 4%.Markets in South Korea, Singapore and Australia gained more than 1%. Shanghai and Wellington were 0.8% higher. Shares listed in Shanghai slipped slightly.


[R]6:30AM European shares gain on overseas rally and resource stocks.[/R]
European markets traded higher in mid-morning session. The U.K. FTSE 100 index rose 1% to trade at 5,723, the German DAX Xetra 30 index advanced 1.3% at 5,573 and the French CAC-40 index added 1.1% at 4,826. Mining shares such as Anglo American Antofagasta, and oil companies, including BP and Royal Dutch Shell, were among the top gainers in Europe. Allianz announced plans to reduce nearly 7,500 jobs as part of a restructuring plan targeting stronger earnings. The company advanced 1.7%. Lafarge, the French building materials group, advanced 3.3% after it lifted its mid-term targets and said it was considering selling its underperforming roofing business to help boost profits. Deutsche Borse advanced 4.2% and Euronext gained 2.9% as investors digested the latest comments from Euronext’s suitors. John Thain, chief executive of the New York Stock Exchange, denied any possibility of making him abandon his bid for the bourse operator.

U.S. light crude oil for August advanced 64 cents to $70.97 a barrel, putting up nearly a dollar on Wednesday, in a gasoline-led rally. European benchmark Brent advanced 65 cents to $69.82. The dollar fell slightly against the euro. The 12-country currency bought $1.2663, up from $1.2660 Wednesday evening in New York. The British pound advanced on the dollar as well Thursday, rising to $1.8457 from $1.8447. The dollar dropped against the yen, to 114.85 yen from 114.87.