Rising Oil, Weak Prices Drag Airlines

123jump.com Staff
18 Jul, 2007
New York City

Oii trades near $75 per barrel adding to the weakness in the trading in New York. Worries related to U.S. mortgage bonds, weak earnings from Pfizer, Altria and airlines left major averages with 1% loss. Germany, France and Swiss markets lost more than 1.5% in sympathy with the New York trading. Spain based Altadis, cigarette maker, agreed to a buyout from Imperial Tobacco for $17.91 billion. Ericsson received $2 billion contract from Bharti in India.

[R]2:30PM New York – Broader averages declined 1% on worries related to mortgage bonds and weak earnings from airlines and companies including Altria, Pfizer and Intel.[/R]

Market averages traded lower after first three hours of trading. Weak earnings news dominated trading sentiment in the morning hours. Pfizer reported 48% decline in earnings. Intel earnings jumped 44% but reported a sharp decline in gross margins. The stock fell 4.5%. Yahoo reported nearly flat earnings and lost 5.3% on the worries that company’s growth is likely to lag that of the industry for several quarters. AMR, parent of American Airlines earnings declined on higher operating costs. Domestic carrier, Southwest profit fell on higher load factor and increased capacity. Cigarette maker, Altria Group earnings fell 18% and stock declined 1.6%.

AMR ((AMR)) reported the second quarter net income of $317 million compared to $291 million from a year ago. The earnings per share declined to $1.08 from $1.19. Revenue for the quarter rose 1.6%. The stock on the news fell 1.2%. Delta ((DAL)) reported second quarter profit of $1.77 billion compared to a loss of $2.21 billion. The company earnings per share in the quarter were $4.49 compared to a loss of $2.21 on a revenue increase of 5.5% to $5 billion. In the third quarter Delta expects domestic capacity to fall between 1% and 3% and international capacity to rise 13%. Southwest Airlines ((LUV)) earnings in the latest quarter fell to $278 million from $333 million or earnings per share declined to 36 cents from 40 cents. The revenue in the quarter increased 5.5% to $2.58 billion. Fuel cost in the quarter rose 24% on 14% higher jet fuel cost per gallon.


[R]9:30AM New York – Market averages in New York fell on a decline in housing permits and stable core rate of consumer price index.[/R]

Labor Department reported that the June consumer price index increased 0.2% after adding 0.7% in May. Core rate of inflation, excluding food and energy gained 0.2% in the month and up 2.2% from a year ago. Energy prices fell 0.5% but gained 5.4% from a year ago on 1.1% drop in gasoline prices. Prices for food rose 0.5% after adding 0.3% in May.

The Commerce Department said that the housing starts in June rose 2.3% at an annual rate of 1.467 million but building permits fell 7.5% to 1.406 million units. The May starts were revised lower to 1.434 million annual units. June housing starts data suggests a decline of 19% from a year ago. Housing starts declined in the Midwest and Northeast but rose 9% in the West.

J P Morgan & Chase reported second quarter earnings rose 20% to $4.23 billion from $3.54 billion a year ago or earnings per share increased to $1.20 from 99 cents.

Altria Group Inc reported second quarter earnings of $2.22 billion from $2.11 or earnings per share increased to $1.05 from $1.00 on a revenue climb of 9.7% to $18.8 billion.

Pfizer Inc second quarter net income fell 48% to $1.27 billion or 18 cents per share. The sales declined 5.6% to $11.1 billion.


[R]7:30AM NY – 6:30 PM Mumbai Sensex finishes 11 points higher in volatile trading, Hindalco zooms[/R]

The Sensex on BSE ended Wednesday 11.35 points higher, or 0.07%, at 15,301.17.

The benchmark index opened almost flat, up only six points and plunged right from the start on profit-taking. Volatility increased in the final hour of trading when both intra-day high of 15,325.78 and intra-day low of 15,160.27 were struck.

The market-breadth was negative with 2,706 stocks traded on the market, 1,141 advanced, 1,490 declined and 75 were unchanged. Of the 30 stocks in the Sensex, 15 advanced, while all the rest declined.

The turnover on BSE was Rs 5,720 crore, lower than Rs 6,100 crore on Tuesday. On NSE, the turnover was Rs 11,318 crore, also lower than Rs 12,729 crore on Tuesday.

Economic and financial news

Ramesh Chandra, Chairman of Unitech Ltd., announced that the real-estate company intends to invest $720 million in four years building 28 hotels together with Marriott International Inc., the biggest hotelier in the world. Four hotels are being built and another 10 will be under construction by the end of the year, and Marriott will manage the properties.

Ericsson, the largest maker of wireless networks in the world, secured a $2 billion order from Bharti Airtel Ltd. Ericsson announced in a statement that the contract will run for two years. Ericsson manages Bharti networks in 15 of the 23 zones that make up India's telecommunications market.

Trading highlights

DLF was the most-active stock with a turnover of Rs 370 crore followed by Indiabulls Real Estate and GMR Infra.

Advancers of the Day

Hindalco led the gainers, soaring 4.5% to Rs 187. The company was under intense volatility, swinging in the range of Rs 173 and Rs 187. Bharti Airtel surged 3.5% to Rs 893, boosted by its deal with Ericsson. Another telecom large-cap, Reliance Communications was also up 1.1% to Rs 567.

Bajaj Auto surged 2.9% to Rs 2,282. Reportedly the company is searching for a big acquisition in the European motorcycle market with bike companies Ducati Motor Holding of Italy and Triumph Motorcycles of the UK the most possible targets.

Cement stocks advanced in the last one hour of trade. ACC shot up 2.0% to Rs 1,133, Grasim gained 2.1% to Rs 2,915, and Birla Corporation soared 3.1% to Rs 303.

TCS advanced 1.3% to Rs 1,170 and ICICI Bank was up over 1% to Rs 985.

Decliners of the Day

Larsen & Toubro led the decliners, shedding 2.6% to Rs 2,330. ONGC plunged 1.8% to Rs 892 on profit-taking. Reliance Energy lost 1.4% to Rs 689. The company reported a net-profit increase of 25.45% to Rs 221.56 crore in the first-quarter of June 2007 compared to Rs 176.61 crore in the comparable period a year earlier.

Satyam dropped 1.4% to Rs 482 and ITC was down 1% to Rs 154. Dr.Reddy's also dipped over 1% to Rs 666. Index heavy, Reliance Industries declined 0.4% to Rs 1,820 on 6.89 lakh shares on profit taking after striking a record high of Rs 1,849 earlier during the day.

[R]6:30AM European markets decline on concern over subprime mortgages, weak oil and tech sectors.[/R]

European markets were lower on Wednesday. All western markets were lower by mid-day. The U.K. FTSE 100 index slid 0.7% at 6,614.10, the German DAX index declined 1.4% at 7,925.48 as it struggled to hold the 8,000 level, and the French CAC-40 index shed 0.8% at 6,046.51. The German market led the decliners in the region.

In London, U.K. stocks fell, led by Man Group, the world largest publicly traded hedge fund manager, and Tate & Lyle, the maker of the sweetener Splenda. Rolls-Royce Group and Invensys were the worst performing stocks among companies dependent on U.S. sales as the pound gained for a fourth day against the dollar.

Man Group lost 1.9 percent. The company announced yesterday after market close that the net asset value of its Diversified Futures fund dropped 0.5% in the week to July 16.

Tate & Lyle slipped 1.6 percent. The company sold its European starch unit for a 20 million-pound, or $41 million, loss and added it expects profit from continuing operations to fall.

Rolls-Royce, aircraft-engine maker, fell 1.3 percent and Invensys declined 1.7 percent. The companies raise about a third of their revenue in the U.S.

J Sainsbury rose 1.7% after it announced it has received a preliminary approach from Qatari investment group Delta Two which could lead to a bid for the entire chain.

In Frankfurt, German benchmark DAX Index declined for a second day, led by DaimlerChrysler and Siemens. DaimlerChrysler, the world fifth-largest carmaker, lost 2.1 percent. Siemens, the largest engineering company in Europe, retreated 1.9 percent.

E.ON lost 1.5 percent. The largest utility in Germany said its Isar 2 nuclear reactor will remain halted for maintenance for longer than expected.

Infineon Technologies, the second-biggest maker of semiconductors in Europe, dropped 1.1 percent.

On other European markets, Dutch beer maker Heineken surged 5.3% after the firm doubled its comparable net profit forecast for the year to a range of 20% to 25%, on strong volume growth in several regions of the world.

[R]5:30AM Commodities mostly decline Tuesday with gold dipping on weakness in oil futures.[/R]

Gold settled slightly lower on the Nymex after following initially the U.S. dollar and later from oil prices. In early trading, gold advanced to $668 an ounce as the dollar lost against the euro. August gold lost 40 cents to settle at $665.90 on the Nymex. Silver for September delivery tracked gold lower and fell 4.7 cents to end at $13.018 an ounce.

Copper prices retreated as well as strike action seemed to fade, and the London Metal Exchange reported a second day of inventory inflows. Nymex copper for September delivery lost 9.5 cents to $3.5525 a pound.

Lead surged nearly 4% on the LME to another record high after the second-largest lead refiner in the world, Doe Run Co., posted sharp production reductions at a Missouri refinery that suffered an explosion on Friday.

Crude oil briefly reached an 11-month high on Tuesday per barrel, then lost as some investors took profits and gasoline futures also retreated. Oil prices gained further, hitting $75.35 on speculative buying. Crude reached its highest levels since August 2006.

Crude oil for August delivery closed the session down 13 cents to $74.02 on the New York Mercantile Exchange. Gasoline futures inched down 2.55 cents to settle at $2.1007 a gallon and August heating oil shed 2.24 cents to end at $2.0332 a gallon.

In Chicago, corn and soybeans lost further after futures for both stocks slid on Monday to the daily limit of 20 cents and 50 cents, respectively. Heavy rains in the Midwest were expected to shower the corn crop with the moisture needed during its important pollination period.

December corn lost 11.75 cents to end at $3.3675 a bushel, while November soybeans shed 38.25 cents to $8.605 a bushel.

Wheat prices rose initially, then dipped along with the other agricultural stocks 0.5 cent lower to $6.0125 a bushel.