Northwest, JetBlue, AirTran Post Losses on Fuel Costs

(Bloomberg) -- Northwest Airlines Corp., JetBlue Airways Corp. and AirTran Holdings Inc. posted fourth-quarter losses as rising fuel costs erased gains from fare increases.

Northwest said its deficit was $8 million after a $267 million year-earlier loss in bankruptcy, while JetBlue's $4 million loss compared with net income of $17 million. AirTran pared its loss to $2.17 million from $3.55 million.

Fuel is ``the principal culprit,'' said Dave Swierenga, president of consulting firm AeroEcon in Round Rock, Texas. ``The softening economy is clearly also having a negative effect.''

Today's results from the three carriers echoed those reported earlier by larger rivals including American Airlines and United Airlines, which also blamed fuel for blunting benefits from higher fourth-quarter ticket prices.

JetBlue jumped as much as 16 percent, leading U.S. airline shares higher, as its loss was narrower than analysts expected. The shares rose 77 cents to $5.71 at 12:19 p.m. New York time in Nasdaq Stock Market composite trading.

Northwest gained 56 cents, or 3.1 percent, to $18.50 in New York Stock Exchange composite trading, while AirTran rose 29 cents, or 3.4 percent, to $8.75.

Northwest, the fifth-largest U.S. airline, and other big carriers raised fares six times last quarter to counter a 43 percent jump in average jet-fuel prices. The major airlines also doubled their fuel surcharges to $40 round trip. The surcharges are supposed to be temporary.

Northwest

Northwest's loss was 3 cents a share, narrower than the loss of 8 cents projected in a Bloomberg survey of nine analysts. Sales at the Eagan, Minnesota-based airline rose 3.9 percent to $3.1 billion.

Northwest said it would have broken even except for a $14 million pretax loss from selling its remaining holdings in commuter carrier Pinnacle Airlines Corp. The quarterly deficit was Northwest's first since leaving bankruptcy in May.

Spending on fuel rose 16 percent to $937 million, making it Northwest's largest cost and helping to boost operating expenses by 4.3 percent. Higher prices were partially offset by a drop in fuel consumption as Northwest retired older, less-efficient planes and reduced mainline capacity by 2.5 percent.

The surge in fuel is spurring calls by investors for airlines to consolidate and pare expenses. Northwest is considering a tie-up with Delta Air Lines Inc., according to Northwest's pilots union. The airlines have declined to comment on any merger talks.

 

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U.S. Stocks Rise After Earnings, Durable Goods Top Forecasts

(Bloomberg) -- U.S. stocks rose for a second day, led by telephone companies and utilities, on better-than- forecast durable goods orders and earnings that topped estimates at two dozen members of the Standard & Poor's 500 Index.

Dow Chemical Co., American Electric Power Co. and Valero Energy Corp. led gains among the 30 companies in the S&P 500 that reported results since markets closed yesterday. Boeing Co. and Caterpillar Inc. climbed after the Commerce Department said orders for U.S. durable goods rose the most since July.

The S&P 500 added 1, or 0.1 percent, to 1,354.97 at 1:06 p.m. in New York. The benchmark for U.S. equities is still down 7.6 percent in 2008 on concern the collapse of the subprime mortgage market will drag the economy into recession. The Dow Jones Industrial Average rose 25.04, or 0.2 percent, to 12,408.93. The Nasdaq Composite Index decreased 6.52, or 0.3 percent, to 2,343.39, dragged down by a 2.1 percent drop in Google Inc.

``When you see a durable goods number like this and then earnings outside of the financial sector doing quite well, people are beginning to realize that perhaps the contagion effect may be somewhat limited,'' said Damon Barglow, who helps oversee $1.9 billion at Eastern Investment Advisors in Boston, in an interview with Bloomberg Radio.

Durable Goods

Index futures doubled their advances after the 5.2 percent gain in durable goods orders last month highlighted how growing overseas demand may spur manufacturing as the U.S. economy slows. The Federal Reserve is to expected to cut interest rates tomorrow in an effort to spur growth.

The S&P 500 has gained 3.5 percent from its 16-month low on January 22 after falling as much as 15 percent from its Oct. 31 record.

Fourth quarter earnings advanced 20 percent on average for the 155 non-financial companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Analysts expect the entire index to post an 18 percent average decline in profit.

Dow Chemical rose 43 cents to $38.02. The maker of 3,200 products ranging from synthetic latex to pesticides posted profit excluding some restructuring costs and other items of 84 cents, topping the 80-cent average estimate of 14 analysts surveyed by Bloomberg.

Valero, American Electric

Valero Energy Corp. climbed $5.22 to $60.12. The largest U.S. refiner posted fourth-quarter profit of $1.02 a share, topping the 59-cent average analysts' estimates compiled by Bloomberg. Earnings were buttressed by a cut in Valero's tax rate and increased use of low-grade crude oil.

Sunoco Inc., the largest oil refiner in the U.S. East, added $2.20 to $63.35. Tesoro Corp., the largest refiner in the U.S. West, gained $2.90 to $41.29. ConocoPhillips, the nation's second-biggest refiner, increased $1.18 to $77.59.

American Electric Power Co. gained 59 cents to $42.82. The biggest U.S. producer of electricity from coal said fourth- quarter profit rose 28 percent on higher power sales and a gain from the sale of a stake in a power plant. Sales rose 10 percent to $3.3 billion on higher utility rates and colder weather that increased use of electricity for heating.

Boeing, the world's second-biggest commercial airplane maker, climbed $2.34, or 3 percent, to $79.94. Caterpillar, the largest maker of bulldozers and excavators, added 72 cents to $68.93.

The dollar strengthened and yields on Treasury notes rose after the durable-goods report. Economists had forecast orders would increase 1.6 percent in December, according to the median of 64 estimates in a Bloomberg News survey.

Eli Lilly & Co. rallied 94 cents to $52.34. Excluding certain items, Lilly earned 90 cents a share, a penny higher than the average estimate of 17 analysts surveyed by Bloomberg.

 

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Durable goods orders jump, house prices slump

(Reuters) - Stronger-than-expected orders for U.S.-made durable goods in December suggested the economy retained some life and might not need a heavy dose of interest-rate cuts, even though house prices fell a record amount in November.

New orders for long-lasting goods rose 5.2 percent last month, a Commerce Department report showed on Tuesday, well above the 1.5 percent increase forecast by economists in a Reuters poll.

The surprise surge in durable goods orders helped offset a report that showed home prices in 10 major metropolitan areas fell a record 8.4 percent in the year through November.

U.S. Treasuries fell after the durables report, which contradicted weakness in other areas of the economy and undermined the argument for more aggressive interest rate cuts by the Federal Reserve. Stocks rose.

A consumer sentiment survey, meanwhile, showed confidence fell in January but by slightly less than economists had expected. The Conference Board's index of consumer sentiment fell to 87.9 from an upwardly revised 90.6 in December.

"Consumers are on the edge but haven't packed it in yet. They are worried about the up-and-down stock market, falling house value and high gasoline prices. But they still have jobs," said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania.

 

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IMF to world economy: no one escapes U.S. slowdown

(Reuters) - When the U.S. coughs, the whole world still catches cold.

"No one is exempt from a global slowdown. That is why you call it global," International Monetary Fund chief economist Simon Johnson said on Tuesday as he updated the IMF's World Economic Outlook.

"It will be very hard for even the most effective counter-cyclical policy to keep any country from having some slowdown in these circumstances," he said.

The IMF has trimmed its estimate for world growth this year to 4.1 percent from its prior outlook of 4.4 percent, with still-resilient emerging economies seen growing at a rate of 6.9 percent from 7.8 percent last year. Even growth in China will moderate from a thumping 11.4 percent in 2007 to 10 percent.

"There are obviously linkages. I think that reports of decoupling have been greatly exaggerated. It is a question of what kind of linkages," Johnson told a media briefing.

World stock markets have swung wildly since problems in the U.S. subprime mortgage market surfaced in August, sparking a global credit crunch that has yet to fully abate. Investors have bet heavily that the United States will tip into recession and drag other economies in its wake.

 

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Wal-Mart cuts prices to lure Super Bowl shoppers

(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) said on Tuesday it is cutting prices on thousands of items by 10 percent to 30 percent this week to win sales from cash-strapped shoppers ahead of the Super Bowl.

A Wal-Mart spokeswoman did not have an exact figure on the number of items included in the price cuts but said the world's largest retailer was reducing prices on groceries, popular electronics and other items that shoppers might buy before the Super Bowl football championship game on Sunday.

Wal-Mart typically announces such widespread price cuts during the ultra-competitive holiday shopping season.

But with 2008 U.S. retail sales forecast to rise at the slowest pace in six years, retailers are turning to promotions to lure shoppers into their stores to spend their limited budgets.

Ahead of the Super Bowl weekend, Best Buy Co Inc's (BBY.N: Quote, Profile, Research) Web site is advertising no interest for three years on all Samsung flat panel TVs $999 and up, while in a similar move, Circuit City Stores Inc (CC.N: Quote, Profile, Research) is offering no interest for 36 months on TVs $999 and higher.

Wal-Mart said it is charging no interest for 18 months on purchases of $250 or more with a Wal-Mart credit card.

 

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PetroChina's 44% Loss Proves BRIC Premium Is Nonsense

(Bloomberg) -- The biggest slide in emerging-market stock valuations in a year and a half is proving that a slowdown in the U.S. economy still matters to Brazil, Russia, India and China.

Shares in the MSCI Emerging Markets Index dropped 12 percent relative to profit this month as the prospect of a U.S. recession pushed two-thirds of the world's equity indexes into so-called bear markets. The last monthly decline as steep was in May 2006, according to data compiled by Bloomberg. Even the price-earnings ratio for the Standard & Poor's 500 Index, the benchmark for U.S. stocks, didn't fall as much.

Companies such as PetroChina Co., the country's biggest oil producer, and Russia's OAO Lukoil show the threat of a global slump is shaking the confidence of investors who viewed developing countries as a haven from the U.S. PetroChina's 44 percent plummet since November erased about $400 billion, more than the market value of Microsoft Corp., the No. 1 software maker. Russian stocks are headed for their biggest loss in 19 months after money managers bought an unprecedented amount in 2007.

``The only way they could decouple would be for them to be on another planet,'' said David Dreman, who oversees $20 billion as chief investment officer at Jersey City, New Jersey-based Dreman Value Management LLC. ``We are the biggest buyer of their products and biggest user of their services, so if our economy slows down their growth rate has to slow down. There's no other plausible way.''

Record High

The MSCI index rose to an all-time high in October on expectations economic growth in the so-called BRIC countries, which accounted for half the world's expansion last year, would shield stocks even if the U.S. stumbled.

Last year's surge pushed the valuation for the MSCI above the S&P 500 for the first time since the Internet bubble burst in March 2000. Investors were willing to risk capital on profit growth in developing markets as their governments boosted currency reserves and cut debt.

Now, the price-earnings ratio is 15.35, down from 17.44 at the end of last year and an all-time high of 90.6 in February 1999, Bloomberg data show. Investors pulled a record $10.7 billion from emerging-market stock funds last week, according to data compiled by Cambridge, Massachusetts-based research firm EPFR Global.

 

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Gold Rebounds as Dollar Tumbles After Fed's Interest-Rate Cut

(Bloomberg) -- Gold rose after an emergency cut in U.S. borrowing costs reduced the value of the dollar, boosting the appeal of the precious metal as an alternative investment.

The Federal Reserve slashed its benchmark interest rate 0.75 percentage point to 3.5 percent after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations. Gold rallied 31 percent in 2007 after the Fed cut rates by 1 percentage point, sending the dollar down 9.5 percent against the euro.

``This is a pure dollar play if ever there was one,'' said Jon Nadler, an analyst at Kitco Minerals & Metals Inc. in Montreal.

Gold futures for February delivery climbed $8, or 0.9 percent, to $889.70 an ounce at 11:57 a.m. on the Comex division of the New York Mercantile Exchange. The price earlier fell as low as $849.50.

Gold for immediate delivery rose $24.22, or 2.8 percent, to $889.22. The price fell 2.1 percent yesterday, when the Comex was closed for Martin Luther King Jr. Day.

The rate cut was the biggest single reduction since the Fed began using the benchmark as the principal tool to control monetary policy in 1990. The dollar dropped as much as 1.3 percent against the euro.

``Lower interest rates are very good for gold because the dollar will weaken against other currencies,'' said Marty McNeill, a trader at R.F. Lafferty Inc. in New York.

Policy makers are scheduled to meet on Jan. 30. Interest- rate futures show a 70 percent chance the Fed will cut the benchmark rate 0.25 percentage point to 3.25 percent at that session, compared with no chance a week ago.

`Total Meltdown'

``At this point, the Fed looks like they're asset- senstive,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``They're going to put liquidity in the market to keep stock prices higher and a total meltdown from happening.''

U.S. stocks tumbled for the fifth session with the Dow Jones Industrial Index plunging as much as 3.8 percent before paring losses. European stocks rose for the first time in six session after the Fed's surprise cut.

``Market participants see weakening economic conditions as the cause of the emergency rate cuts and stronger inflationary pressures as a result,'' said Stuart Flerlage, who helps manage more than $600 million at NuWave Investment Corp. in New York ``This will continue to provide a strong bid for gold.''

 

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