Airlines Gain despite Rising Oil

Elena
28 Jun, 2007
New York City

U.S. market averages traded mixed, as investors showed reluctance to making big moves ahead of the Fed Reserve''s decision on interest rates. Strength in the energy sector provided some support. Crude oil prices topped $70 a barrel, sending energy stocks up. Despite the higher oil prices, airlines advanced after JP Morgan upgraded six airline stocks. Alaska Air jumped 5%, American Airlines and UAL Corp. rose 3.5% each, while Continental Airlines added 2.8%.

[R]11:30AM Market averages traded mixed. Crude oil rallied. Airlines gained on upgrade.[/R]

U.S. market averages traded mixed, as investors showed reluctance to making big moves ahead of the Fed Reserve's decision on interest rates. Strength in the energy sector provided some support. Crude oil prices topped $70 a barrel, sending energy stocks up. The markets also benefited from significant strength among gold, utilities, and steel stocks.

Despite the higher oil prices, airlines advanced after JP Morgan upgraded six airline stocks. Alaska Air ((ALK)) jumped 5%, American Airlines ((AMR)) and UAL Corp. ((UAUA)) rose 3.5% each, while Continental Airlines ((CAL)) added 2.8%.

Communications equipment stocks advanced after Cisco Systems Inc. ((CSCO)) got a brokerage upgrade. Other notable gainers included Ciena ((CIEN)), up 2.7%, Adtran ((ADTN)), up 2.9% and ADC Telecommunications ((ADCT)), higher by 2.6%. At the same time, financial shares declined on concerns about the subprime mortgage market and the outlook for buyout activity.

Among individual stocks, Monsanto ((MON)) gained 1.5% on strong Q3 earnings. Constellation Brands ((STZ)) rose 4% after posting in line-with-estimate earnings. Capital One Financial ((COF)) rose 2% after it said it will cut 2,000 jobs. On the side of the losers, Smart Modular ((SMOD)) dropped 11% after the memory chip maker reported weaker-than-expected Q3 revenues.

The Dow Jones industrial average was down 16.26 points, or 0.12%, at 13,411.47. The Standard & Poor's 500 was down 0.82 points, or 0.05%, at 1,505.52. The Nasdaq Composite Index was up 5.06 points, or 0.19%, at 2,610.41.

[R]GDP revised up 0.7% in Q1.[/R]
The Department of Commerce released its final report on first quarter gross domestic product Thursday morning, showing that the pace of GDP growth for the quarter was upwardly revised a little less than economists had been expecting. The report showed that GDP growth for the quarter was revised up to 0.7 percent compared to the previously reported 0.6 percent growth. Economists had been expecting growth to be revised up a little more to 0.8 percent. The Commerce Department noted that the upward revision was primarily due to an upward revision to exports of goods and services. Despite the upward revision, however, the GDP growth in the first quarter still marks the slowest pace of growth in over four years.

The growth for the quarter compares to 2.5 percent growth that was seen in the fourth quarter. The slowdown in the pace of growth compared to the previous quarter reflected an upturn in imports, a deceleration in exports, a downturn in federal government spending, and a deceleration in consumer spending on non-durable goods. The report also showed that the closely watched reading on core consumer prices was revised up to show 2.4 percent growth compared to the previously reported 2.2 percent growth. Core consumer prices rose at a 1.8 percent rate in the previous quarter.


[R]9:45AM Wall Street opened lower on nervousness ahead of Fed’s decision on rates.[/R]

Wall Street opened mixed on Thursday ahead of the Fed Reserve''s decision on interest rates. Investors were also digesting a key reading on inflation. Gross domestic product in Q1 was revised to 0.7% from 0.6% previously, while core consumer prices rose at a 2.4% annualized pace in the quarter, revised up from the 2.2% rate previously projected. In another economic report, the Labor Department said that initial jobless claims fell by 13,000 to 313,000 last week.

In corporate news, Bed Bath & Beyond ((BBBY)) lost 3.2% after the home goods chain cut its full-year profit target, citing uncertain economic trends. semiconductor equipment maker Novellus Systems ((NVLS)) fell 3.5%after releasing a Q2 profit warning, due to weakness in the chip market.

Among earnings-related movers, Monsanto ((MON)) added 1.5% after it reported a sharply higher Q3 earnings to $1.03 a share from 60 cents a share a year ago, citing a strong agricultural season. On the deal news front, General Motors ((GM)) rose 2.2% amid reports that it would sell its Allison Transmission business for $5.6 billion to Carlyle Group and Onex Corp.

In midmorning trading, the Dow Jones industrial average rose 3.41, or 0.03%, to 13,432.36. The Standard & Poor''s 500 index rose 1.57, or 0.10%, to 1,507.91, and the Nasdaq composite index rose 8.67, or 0.33%, to 2,614.02. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 5.09% from 5.08% late Wednesday.


[R]9:30AM The FTSE 100 advances on strong gains by British Land and Liberty International.[/R]

The FTSE 100 in London was 39.8 points, or 0.5%, higher at 6,561.5.

Advancers

British Land led the gainers, up 2.4% and another large-cap Liberty International was 2.3% higher. Land Securities also rose 2.1%. Other advancers included Whitbread, the leisure group, which gained 2.6%, while Vodafone surged 2.2% on continued talk of stakebuilding.

Further deal talk also lifted J Sainsbury, up 1% as reports circulate that property owner Robert Tchenguiz had doubled his position in the company to more than 10%

In mid-cap stocks, Domestic & General, a company that sells extended warranties on household appliances, rallied 8.3% after admitting it had received further bid interest.

Newspaper group Trinity Mirror gained 1.4% after it announced that stability rose within its advertising markets.

Decliners

News that adverse currency movements would reduce operating profit at Guinness brewer Diageo by up to 90 million pounds pulled the shares 1.8% lower.

Lender Northern Rock, is still losing ground having warned on profit in the previous session. Northern Rock fell 12% on Wednesday, and now, the mortgage bank, is a further 0.6% lower.


[R]9:00AM Market futures declined ahead of rate decision.[/R]

U.S. stock market futures pointed slightly lower, reflecting cautiousness ahead of the Fed Reserve’s interest-rate decision and economic outlook. Rates are expected to remain unchanged at 5.25%. Rising oil futures and a profit warning at Novellus Systems further weighed on the sentiment, helping to offset a broker upgrade of Intel.

Novellus Systems ((NVLS)) fell 6.7% in pre-open trade after it said it expects Q2 revenue and earnings at the low end of its previous guidance. Intel ((INTC)) rose 1.4% in pre-open trading after it was upgraded to overweight from equal weight at Lehman Brothers on robust sales forecast. Again in the tech sector, LSI ((LSI)) dropped 7% after the company said it expects lower than expected Q2 revenue, leading to 900 job cuts.

Among other pre-market highlights, General Mills ((GIS)) reported earnings slightly below forecast. Constellation Brands ((STZ)) earnings on an adjusted basis came in analyst estimates. S&P 500 futures fell 1.3 points at 1,517.60 while Nasdaq 100 futures were up 1.5 points at 1,957.00. Dow industrial futures fell 15 points.


[R]8:30AM Asian stocks finish mostly higher with HK and Japan leading regional gainers.[/R]

Asian markets ended higher Thursday. In Tokyo, the Nikkei 225 Average settled 0.5% higher at 17,932. Sentiment was upbeat in Japan that US market will bounce back and that domestic market environment will also improve. Many large-caps advanced, with Toshiba up 0.8%, Toyota 0.9% higher and Nissan rising 1.4%.

After three days of declines, HK rebounded. The Hang Seng Index surged 1.1% to end at 21,938. China Mobile was the main gainer with a 1.7% increase on the prospect of a yuan-denominated initial public offering in Shanghai soon. Cnooc gained 4.1% on higher oil prices. China Construction Bank advanced 2.1%, and China Life gained 1.2%.

South Korean Kospi Index advanced 1.1% to 1,751. Construction stocks and nonlife insurers ended the four-day losing streak on the market. Hyundai gained 3.9% and Daewoo Engineering & Construction settled up 3.1%. Dongbu Insurance surged 4.1%. Australian S&P/ASX 200 also rose 1.3% to 6,265. BHP Billiton, up 2%, led the market higher. Rio Tinto advanced 2.7% and Woodside Petroleum rallied 3% after crude oil and metal prices rose.

The benchmark Shanghai Composite Index in China bucked the trend and plunged 4% to settle at 3914. The market declined sharply on reports that the government is reviewing a measure to reduce or cancel the tax on interest income so that investors would not enter the market, but would keep their money in bank accounts instead.


[R]7:30AM NY-6:30PM Mumbai Sensex ends higher on rally in cement stocks.[/R]

The Sensex on BSE finished 73.51 points higher, or 0.51%, at 14,504.57.

The market-breadth was strong with 1,442 stocks advancing, while 1,141 declined and only 72 were unchanged. Of the 30 stocks in the Sensex, 19 advanced, while the others declined. The turnover on BSE was Rs 4,682 crore, compared with Rs 4,844 crore on Wednesday. On NSE, the turnover surged to Rs 12,193 crore, much higher than Rs 9,375 crore on Wednesday.

Economic news

Finance Minister P Chidambaram said in an interview on a local television channel that the government has no intention of controlling the price of cement, nor was there any control recently.

U.S. wheat growers announced that they may not take part in an Indian tender of one million ton of wheat because there is still no agreement on quality standards of wheat import.

The rupee advanced after a four-day decline on buying from banks to meet cash requirements as the overnight borrowing rate surged to a six-week high. The rupee gained 0.2% to 40.905 against the dollar this morning in Mumbai.

Trading highlights

IFCI was the most active stock with a turnover of Rs 137.50 crore followed by new issue Meghmani Organics and Reliance Industries.

Advancers

Cement stocks rallied on the Indian finance minister P Chidambaram’s statement. ACC soared 8.3% to Rs 899. Gujarat Ambuja Cements surged 7.4% to Rs 125, and Grasim rallied 4.8% to Rs 2,624.

HDFC rallied 5% to Rs 1,958 after it got Rs 445 crore for its stake sale in BPO firm Intelenet to Blackstone, generating a capital gain of Rs 381 crore. Ranbaxy Laboratories, the pharmaceutical giant, gained 1.5% to Rs 348. Ranbaxy Pharmaceuticals Inc, its wholly-owned U.S. subsidiary, has started selling Pravastatin Sodium 80 miligram tablets in the US.

State Bank of India gained 1.6% to Rs 1,470. Reportedly, SBI intends to launch a private equity fund worth $1 billion. ITC and Wipro advanced 1% each at Rs 155 and Rs 515, respectively.

Decliners

Auto makers declined on profit taking. Bajaj Auto led the decliners in the Sensex, down 1.8% to Rs 2,094 as the stock went ex-dividend today, Tata Motors dipped 1% to Rs 665 and Maruti Udyog declined 0.3% to Rs 750.

Oil exploration large-cap Oil & Natural Gas Corporation declined 1.6% to Rs 906 and Cipla lost over 1% each to Rs 203. Index heavy Reliance Industries shed 0.3% to Rs 1,692.


[R]6:30AM European markets advance on energy and mining stocks.[/R]

European markets are higher on Thursday. The German DAX 30 index advanced 1% to trade at 7,880.13, the French CAC-40 index advanced 0.9% at 5,996.38, and the U.K. FTSE 100 index rose 0.7% at 6,571.80. National benchmarks increased in all of the 17 western European markets that were open.

Advancers

In Germany, the advances of more than 2% put sportswear group Adidas and truck maker Man in the lead. In France, turbine maker Alstom and yogurt producer Danone rose 1.8% each and boosted the market. Nestle climbed 2.5% as Deutsche Bank raised its recommendation on the shares to buy from hold.

BP gained 1.9% and Statoil ASA, largest producer of oil and natural gas in Norway, rose 1.7%. Royal Dutch Shell also advanced 2.1%.

Miners were also strong as the price of copper gained. BHP Billiton climbed 1.6% and Rio Tinto Group, the world third-biggest mining company, added 1%.

Shares in Vodafone Group rose 2% after a report from Dutch technology magazine Bright that the firm is likely to supply Apple Inc iPhone in Europe, starting in December.

Decliners

Diageo slid 1.3% even as the world biggest liquor company announced revenue growth accelerated in the fiscal second half.

Commodities

Oil prices advanced Thursday tracking a U.S. government report that showed an unexpected drop in gasoline stocks. Crude oil for August delivery gained 24 cents to $69.21 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The Brent crude contract for August delivery gained 12 cents to $70.67 a barrel on the ICE Futures exchange in London.

Gold gained for a second day in London on speculation higher oil costs will revive demand for the metal. Gold for immediate delivery climbed $2.40, or 0.4%, to $645.90 an ounce. Silver increased 18.49 cents, or 1.5%, to $12.46 an ounce.

Currencies

The dollar fell against the euro Thursday as markets awaited the U.S. Federal Reserve interest rate decision. In morning European trading the euro bought $1.3462, up from $1.3445 in late New York trading on Wednesday. The British pound was at $2.0017, up from $1.9978 the night before, while the dollar rose to purchase 123.11 Japanese yen from 122.43 in New York.