Brazil stocks, real down as investors take profits

(Adds stocks, interest rate futures contracts)

SAO PAULO Oct 16 (Reuters) - Brazilian shares slumped in on Friday as investors cashed on hefty gains made in recent sessions, with losses on Wall Street adding to bearish sentiment.

The benchmark Bovespa index .BVSP sank 1.24 percent to 65,879.45 in morning trading, on track to snap a five-day streak of gains during which the index had added about 6.5 percent.

The index has advanced nearly 78 percent so far in 2009 through Thursday's close.

Brazil's currency, the real BRBY, hit 1.714 per dollar, off the morning's low point of 1.726 per dollar but still representing a slump of 0.76 percent.

Traders not only booked profits on the real's 37-percent gains so far in 2009 but were also spooked by reports that the government may revive a tax on capital inflows to prevent the real from strengthening even more.

"The news about the tax is the strongest point," said Joao Eduardo Santiago, a trader at Banco Alfa. "There's also a technical adjustment because the last few days have been very strong (for the real)."

The fall in stock prices was also based on booking profits, said Otavio Vieira, director of investments at Safdie.

"It's natural given the gains in Brazilian assets in recent weeks," he said. "It could even reverse at some point during the day."

Stocks in the United States fell, too, on disappointing quarterly results from Dow components General Electric Co (GE.N) and Bank of America Corp (BAC.N). Benchmark U.S. stock indexes by about 1 percent in early trade.

Because the United States is the world's largest economy, Brazilian investors often look to those markets to gauge international sentiment and risk-taking.

State-controlled energy giant Petrobras (PETR4.SA) slid 0.44 percent to 36.44 reais as crude oil CLc1 lost 0.46 percent on the disappointing earnings and well-stocked inventories.

Mining company Vale (VALE5.SA), the world's largest iron ore producer, lost 0.97 percent to 39.80 reais.

Petrobras and Vale are the two most heavily-weighted stocks in the index.

Steelmakers, which have advanced recently on recovery hopes and plans for beefed-up construction in Brazil ahead of the 2014 World Cup and 2016 Olympics, fell on Friday.

Gerdau (GGBR4.SA) lost 1.17 percent to 29.52 reais, Usiminas (USIM5.SA) slipped 1.67 percent to 52.31 reais and CSN (CSNA3.SA) declined 1.38 percent to 60.95 reais.

Sugar and ethanol company Cosan (CSAN3.SA) shed 0.34 percent to 20.29 reais. The company's chief executive unexpectedly resigned on Thursday, though he will remain chairman of the board. [ID:nN15289894.]

Changes in yields on Brazilian interest rate futures contracts <0#DIJ:> were mixed, with short-term contracts largely dipping.

The yield on the contract due January 2011 DIJF1 edged up to 10.49 percent from 10.47 percent. The yield on the contract due January 2012 DIJF2 rose to 11.61 percent from 11.52 percent.

Both were among the most highly-traded contracts of the morning.

Investors use the contracts to bet on future expectations for the country's benchmark interest rate, the Selic, currently at a record-low 8.75 percent.

Analysts expect central bank policy-makers will keep rates on hold at next week's monetary policy meeting and perhaps beyond. (Reporting by Silvio Cascione and Luciana Lopez, editing by W Simon) ((luciana.f.lopez@thomsonreuters.com; Reuters Messaging: luciana.f.lopez.thomsonreuters.com@reuters.net; +5511-5644-7756))