February, 13, 2024, Newsletter

Dear Friends,

Tangents: Happy Shrove Tuesday.

February 13^th, 1633: Italian astronomer Galileo Galilei arrived in Rome for trial before Inquisition for professing belief that earth revolves around the Sun.
1741: First magazine published in the U.S.
1945: Fire bombing of Dresden.
2005:  Ray Charles won eight posthumous Grammy awards for his final album, “Genius Loves Company.” Go to article >>

Peter Gabriel, b. 1950.

11,000-year-old submerged stone wall discovered off Germany was once used to trap reindeer
The wall may be among the oldest hunting structures on Earth and one of the largest Stone Age structures ever found in Europe. Read More.

Medieval iron glove, likely worn by a knight, discovered near Swiss castle
The right-handed glove would have been worn by a knight in the 14th century. Read More.

Is it possible to have too many antioxidants?
Antioxidants have long been touted as disease-fighting molecules, and it’s easy to assume that the more of them you eat, the healthier you will be. But research shows that larger doses can actually be harmful.
Full Story: Live Science (2/12).

Watch the 1st X-class solar flare of 2024 erupt from the sun in explosive fashion
An X-class flare, the most powerful type of solar flare, erupted from the sun on Feb. 9. Lucky Earth wasn’t in the firing line. Read More.

Retailers are working to meet Valentine’s Day demand
Cocoa prices are soaring. Will it affect your Valentine’s Day chocolate?

Tiger Woods launches new apparel partnership
The golf star is aligning with a new clothing company after ending a 27-year Nike partnership.

This underwater wall was built more than 11,000 years ago
Scientists say this Stone Age megastructure wasn’t formed by nature, but rather by hunter-gatherers who lived thousands of years ago.

Greenland has lost ice 36 times the size of New York
Swaths of the country that were once covered in ice and snow have been transformed into wetlands or shrub areas. View photos here

Jon Stewart is back on ‘The Daily Show’
Monday marked the first night that Jon Stewart returned to hosting “The Daily Show” after more than eight years away. Here’s how the show went.

PHOTOS OF THE DAY

Lake District, UK
A hidden heart shape is revealed at the Elterwater Quarry after water levels dropped, exposing the romantic geographical feature filled with turquoise water caused by the chemical compounds in the 500-year-old volcanic rock
Photograph: Owen Humphreys/PA

Binche, Belgium
Revellers at the Binche Carnival, one of the most ancient and UNESCO listed traditions.
Photograph: REX/Shutterstock

Doha Port, Qatar
Ginni van Katwijk, of the Netherlands, competes in the preliminary round of the women’s 20 metre high diving event during the 2024 World Aquatics Championships
Photograph: Sébastien Bozon/AFP/Getty Images
Market Closes for February 13^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1990, junk-bond giant Drexel Burnham Lambert sought bankruptcy protection following years of legal troubles. Only days earlier, its Chief Executive Fred Joseph had told The Wall Street Journal, “I see daylight. The worst is behind us.”
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell 2.3% at 20,584.97 in Toronto.
The move was the biggest since falling 2.7% on Sept. 23, 2022 and follows the previous session’s increase of 0.3%.
Today, information technology stocks led the market lower, as all sectors lost; 212 of 225 shares fell, while 13 rose.
Shopify Inc. contributed the most to the index decline, decreasing 12.5%.
SSR Mining Inc. had the largest drop, falling 53.5%.
Insights
* The index declined 0.6% in the past 52 weeks. The MSCI AC Americas Index gained 19% in the same period
* The S&P/TSX Composite is 3.1% below its 52-week high on Jan. 31, 2024 and 10.1% above its low on Oct. 27, 2023
* The S&P/TSX Composite is down 1.8% in the past 5 days and fell 1.9% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 16.1 on a trailing basis and 15.7 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.2% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.34t
* 30-day price volatility rose to 10.63% compared with 8.00% in the previous session and the average of 9.70% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Information Technology| -142.4529| -7.0| 0/10
Financials | -122.7276| -1.9| 2/25
Materials | -71.1033| -3.4| 1/51
Energy | -54.5412| -1.5| 4/37
Industrials | -24.6360| -0.8| 3/23
Utilities | -18.7275| -2.3| 0/15
Consumer Discretionary| -18.6802| -2.4| 0/13
Communication Services| -13.4429| -1.7| 0/5
Real Estate | -10.3414| -2.0| 1/20
Consumer Staples | -5.0502| -0.6| 1/10
Health Care | -0.6279| -1.0| 1/3
================================================================
| | |Volume VS| YTD
| Index Points | | 20D AVG | Change
Top Contributors | Move |% Change | (%) | (%)
================================================================
Shopify | -126.7000| -12.5| 102.5| 1.6
RBC | -28.8300| -2.2| -63.7| -4.1
Brookfield Corp | -20.2900| -3.7| 49.6| -0.2
Couche-Tard | 0.3070| 0.1| 65.1| 3.3
TMX Group | 0.6400| 1.0| 51.8| 7.3
Waste Connections | 8.5030| 2.3| 138.3| 7.3
US
By Rita Nazareth
(Bloomberg) — Wall Street got a reality check on Tuesday, with hotter-than-estimated inflation data triggering a slide in both stocks and bonds.
Equities pushed away from their all-time highs as the consumer price index topped estimates across the board.
Treasuries sold off, with two-year yields hitting the highest since before the December central bank “pivot.”
Swap traders ratcheted down their expectations for a Fed cut before July.
The stock market’s “fear gauge” — the VIX — surged the most since October.
And a measure of perceived risk in the US investment-grade corporate bond market soared — with three issuers getting sidelined.
“It is too early to declare victory over inflation,” said Torsten Slok at Apollo Global Management. “Maybe the ‘last mile’ was indeed more difficult.”
The CPI data came as a disappointment for investors after a recent downdraft in price pressures that helped build expectations for rate cuts this year.
The numbers also gave credence to the wait-and-see approach highlighted by Jerome Powell and a chorus of Fed speakers.
The S&P 500 fell 1.4%, dropping below 5,000 in its worst CPI day since September 2022.
Rate-sensitive shares like homebuilders and banks sank, while Tesla Inc. led losses in mega-caps.
The Russell 2000 of small caps slumped about 4%.
US 10-year yields climbed 14 basis points to 4.31%.
The so-called real yield hit 2%.
The dollar rose, driving gold under $2,000.
“If Powell and other Fed members hadn’t already thrown cold water on the prospects for a March rate cut a few weeks ago, today’s CPI report might have done that,” said Jason Pride at Glenmede. “Evidence of still-sticky services inflation is likely to give the Fed pause before cutting rates too quickly.”
Pride says rate cuts are likely still on the table for this year, but they may begin later than the market may be anticipating.
Swap contracts referencing Fed policy meetings — which as recently as mid-January fully priced in a rate cut in May and 175 basis points of easing by the end of the year — were roiled.
The odds of a May cut dropped to about 32% from about 64% before the inflation data, with fewer than 90 basis points anticipated this year.
“While the door for a March cut had already been effectively shut given the recent Fed commentary and the jobs reports, the Fed has now locked the door and lost the key,” said Greg Wilensky at Janus Henderson Investors.
Much of the unanticipated increase in CPI was concentrated in what looks like a “noisy jump” in Owners’ Equivalent Rent (OER) — a shelter price indicator, according to Tiffany Wilding at Pacific Investment Management Co.
While that will likely revert, the details were consistent with the Fed having a “last mile problem” — and not cutting rates until midyear or later, she added.
The January CPI report is a reminder that inflation is a difficult, not-well-understood problem that doesn’t move in a straight line, according to Chris Zaccarelli at Independent Advisor Alliance.
“Bonds are too expensive if inflation is still a problem and the stock market can’t keep rallying if rates are going to be higher-for-longer – especially if the assumption that the Fed is completely done raising rates is incorrect,” he added.
Andrew Brenner at NatAlliance Securities expects more volatility for the rest of the week “as the bears have the upper hand and the bulls are grasping.”
To Jeffrey Roach at LPL Financial, while the data wasn’t exactly what the Fed wanted to see, investors will have to wait until later this month for a more comprehensive look at consumer prices.
“Just as the Fed said it wouldn’t rush to cut rates even after several months of encouraging economic data, they’re not going to immediately reverse course just because of one hotter-than-expected CPI reading,” said Chris Larkin at E*TRADE from Morgan Stanley. “Until proven otherwise, the longer-term cooling inflation trend is still in place. The Fed had already made clear that rate cuts weren’t going to happen as soon as many people wanted them to. Today was simply a reminder of why they were inclined to wait.”
The disinflation process is not a straight line — and one hot print on its own after an extended string of more favorable releases does not represent a new trend, said Josh Jamner at ClearBridge Investments.
The surprise jump in the January consumer price index probably will be less pronounced in the Fed’s preferred inflation gauge and potentially less alarming to central bank officials as they weigh when to cut interest rates.
Based on the latest CPI figures, the personal consumption expenditures price index excluding food and energy — due from the Bureau of Economic Analysis on Feb. 29 — probably rose 0.29% last month, Morgan Stanley economists said.
“The CPI data has disrupted the string of Goldilocks growth and inflation data that had helped to lift the S&P 500 over 5,000,” said Brian Rose at UBS Global Wealth Management. “But it doesn’t change our positive fundamental outlook for 2024 of solid growth, further disinflation, and the start of Fed rate cuts in Q2 that is supportive of risk assets.”

More Comments on CPI:
* Skyler Weinand at Regan Capital: “Getting to the Fed’s magical 2% inflation target may prove more difficult than expected and result in elevated interest rates for a longer period of time.”
* Rob Swanke at Commonwealth Financial Network: “This is certainly not the news that the Fed will be looking for in order to begin cutting rates. So we may be on hold for several more months.”
* Paul Toft at Key Private Bank: “We remain aligned with the Fed’s comments of being more cautious in when to start cutting rates, and we believe the first rate cut will not come until the June or July meeting.”
* Neil Birrell at Premier Miton Investors: “We are not at the stage of worrying about inflation reaccelerating, but we are not out of the woods yet either.”
* Quincy Krosby at LPL Financial: “The ‘last mile’ – as expected – is proving to be stickier and more stubborn inhibiting even the most dovish wing of the FOMC.”
* Bryce Doty at Sit Investment Associates: “From the Fed’s perspective, economic growth is strong enough that there isn’t a sense of urgency on cutting rates. In the meantime, bond investors will get to enjoy higher yields a
little while longer than many thought.”
* Jim Baird at Plante Moran Financial Advisors: “There’s still a viable path to a soft landing, but the January inflation report is a reminder that getting there won’t be a walk in the park.”
* Lauren Goodwin at New York Life Investments: “Though the timing of a Fed rate cut is uncertain, most investors are betting that a cut is the next move. Investors can consider locking in higher policy rates before Treasuries
reflect lower rates in the coming months.”
* Alexandra Wilson-Elizondo at Goldman Sachs Asset Management: “A delayed Fed means a focus on cash rich companies that benefit from higher real wages and a strong consumer, rather than on cyclicals that have indebtedness in floating rate form.  For rates, we have kept dry powder for better entry points into the market as it reprices the central bank delay and valuations are more appealing with better risk/reward.”
Well ahead of the CPI report, Bank of America Corp. clients posted the largest outflows from US equities in five weeks in the period ended last Friday.
Clients were net sellers of US equities last week, withdrawing $1.9 billion from the asset class — the most in five weeks, BofA quantitative strategists led by Jill Carey Hall said.
Investors are going “all in” on US technology stocks as they turn the most optimistic about global growth in two years, according to a separate survey by BofA.
Allocation to tech is now at the highest since August 2020.
Exposure to US equities more broadly has also risen, while easing macro risks prompted investors to trim cash levels by 55 basis points from January.
Previous such declines in cash levels were followed by stock market gains of about 4% in the following three months, strategist Michael Hartnett wrote in a note.
US equity futures had a sharp turn to bullish flows in the middle of last week, ending it with $18 billion new longs in S&P 500 futures, according to Citigroup Inc. strategists.
Nasdaq 100 futures also had $7.4 billion new longs, and long positioning on the benchmark is very extended and completely one-sided, a team led by Chris Montagu wrote.

Corporate Highlights:
* Boeing Co. plans to build its 737 Max aircraft at a slower pace during the first half of this year as it tackles quality issues and supplier glitches under the close supervision of US aviation regulators, Chief Financial Officer Brian West said.
* Krispy Kreme Inc. said it’s expecting double-digit price increases in some of the ingredients for its doughnuts, highlighting the cost pressures facing US companies.
* Coca-Cola Co. gave a 2024 organic revenue outlook that beat expectations, with a diverse group of products expected to boost results.
* GlobalFoundries Inc., the largest US maker of made-to-order semiconductors, gave a lackluster revenue forecast for the current quarter, indicating that a glut in industrial and automotive components is still weighing on orders.
* AutoNation Inc., one of the biggest car dealership chains in the US, beat analysts’ fourth-quarter profit and sales expectations.
* Marriott International Inc. reported fourth-quarter earnings that topped estimates as the company benefited from demand growth outside the US.
* Biogen Inc. reported fourth-quarter revenue that missed analysts’ expectations as the company’s multiple sclerosis drugs continued to decline.
* Shopify Inc. reported sales and profit for the fourth quarter that narrowly beat analysts’ estimates, suggesting the Canadian e-commerce giant fended off competition from Asian shopping platforms like Temu, Shein and TikTok.
* Activist investor Carl Icahn disclosed a 9.91% stake in JetBlue Airways Corp., calling the stock undervalued, and said he’s had talks with management about the possibility of representation on the board.
* ASML Holding NV dropped in the first minutes of trading before quickly recovering, with traders blaming the unexpected slump on an erroneous trade.

Key Events this Week:
* Eurozone industrial production, GDP, Wednesday
* BOE Governor Andrew Bailey testifies to House of Lords economic affairs panel, Wednesday
* Chicago Fed President Austan Goolsbee speaks, Wednesday
* Fed Vice Chair for Supervision Michael Barr speaks, Wednesday
* Japan GDP, industrial production, Thursday
* US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
* ECB President Christine Lagarde speaks, Thursday
* Atlanta Fed President Raphael Bostic speaks, Thursday
* Fed Governor Christopher Waller speaks, Thursday
* ECB chief economist Philip Lane speaks, Thursday
* US housing starts, PPI, University of Michigan consumer sentiment, Friday
* San Francisco Fed President Mary Daly speaks, Friday
* Fed Vice Chair for Supervision Michael Barr speaks, Friday
* ECB executive board member Isabel Schnabel speaks, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 fell 1.4% as of 4 p.m. New York time
* The Nasdaq 100 fell 1.6%
* The Dow Jones Industrial Average fell 1.4%
* The MSCI World index fell 1.2%
Currencies
* The Bloomberg Dollar Spot Index rose 0.6%
* The euro fell 0.6% to $1.0707
* The British pound fell 0.3% to $1.2589
* The Japanese yen fell 1% to 150.78 per dollar
Cryptocurrencies
* Bitcoin fell 0.9% to $49,400.8
* Ether fell 0.1% to $2,629.74
Bonds
* The yield on 10-year Treasuries advanced 14 basis points to 4.31%
* Germany’s 10-year yield advanced three basis points to 2.39%
* Britain’s 10-year yield advanced nine basis points to 4.15%
Commodities
* West Texas Intermediate crude rose 1.1% to $77.78 a barrel
* Spot gold fell 1.4% to $1,992.54 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alexandra Semenova, Felice Maranz, Jessica Menton, Elena Popina, Bre Bradham, Carly Wanna, Sagarika Jaisinghani, Matthew Boesler and Christopher DeReza.
Have a lovely evening.

Be magnificent!

As ever,

Carolann
The worst sin toward our fellow creatures is not to hate them, but to be indifferent to them: that’s the essence of inhumanity. –George Bernard Shaw, 1856-1950.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com