Brazil stocks slip on profit-taking, real nearly flat

SAO PAULO, July 22 (Reuters) - Brazilian stocks opened lower on Wednesday, as profit-taking took hold amid investor unease over earnings reports from abroad.

The benchmark Bovespa index.BVSP fell 0.24 percent in early trading to 53,106.13, braking a five-day rally in volatile trading.

Brazil's currency, the real BRBY, stayed nearly flat, inching up 0.05 percent to 1.907 reais to the dollar.

"People want to put profits in their pockets," said Jose Simao Jr., a director for equities trading at Sao Paulo-based brokerage Intrader.

But he noted that a global economic recovery appeared to be taking shape, no matter how slowly, and while profit-taking was a factor early in the session, Simao said "I think the market could still go up."

After mostly positively earnings reports last week, disheartening results from U.S. financial giants Morgan Stanley and Wells Fargo cooled investor ardor on Wednesday.

Brazilian investors often look to U.S. markets to gauge international sentiment and risk-taking.

Cautious congressional testimony on Tuesday from U.S. Federal Reserve Chairman Ben Bernanke had already cooled investor enthusiasm.

Bernanke is giving testimony to the U.S. Senate Banking Committee, the second day of his biannual testimony on the U.S. economy, and answering questions on the economic outlook and monetary policy. On Tuesday, he gave the identical testimony before a U.S. House of Representatives committee.

Among companies having an impact on the market, state-controlled energy company Petrobras (PETR4.SA) fell 0.06 percent percent to 31.80 reais, dragged down by a 1.37 percent decline in crude oil CLc1.

Vale (VALE5.SA), the world's largest iron-ore producer, slid 0.13 percent to 31.52 reais.

Petrobras and Vale have the largest weighting in the index.

But lower oil prices benefited several airliners, among them, Gol and TAM. Credit Suisse raised both companies to outperform from neutral, calling Gol the preferred name among Brazilian air carriers. Shares of Gol (GOLL4.SA) gained 1.96 percent to 14.58 reais, and shares of TAM (TAMM4.SA) added 0.86 percent to 24.59 reais.

Net Servicos de Comunicacao SA (NETC4.SA), Brazil's largest cable services provider, fell 3.16 percent to 19.95 reais despite reporting in the morning that profit more than quadrupled in the second quarter. Simao also attributed that drop to profit-taking.

The firm's shares had gained about 20 percent from June 16 through Tuesday.

YIELDS

Yields on Brazilian interest rate futures contracts <0#DIJ:> sank, reflecting investor expectations that the central bank's monetary policy committee will cut the benchmark interest rate at the end of its meeting today.

The yield for the contract due Jan. 2010 DIJF0 dipped to 8.58 percent from 8.61 percent. The yield for the contract due Jan. 2011 DIJF1 fell to 9.63 percent from 9.66 percent. Both are among the most highly-traded contracts.

Analysts broadly expect the bank to announce a 50-basis-point cut to the rate, called the Selic.

The bank has already slashed 450 basis points off the rate this year, which now stands at a record-low 9.25 percent.

Brazil's President Luiz Inacio Lula da Silva said on Tuesday he sees room for interest rates to fall further because of recent economic measures giving policymakers more leeway. But, he stressed, the ultimate decision lies with the bank. [ID:nSPG002424] (Reporting by Luciana Lopez; Editing by Theodore d'Afflisio)