February 26, 2024, Newsletter

Dear Friends,

Tangents: Happy Monday.
February 26 , 1991: The world’s first web browser, Nexus, is presented to the public.
On Feb. 26, 1993, a bomb exploded in the garage of New York’s World Trade Center, killing six people and injuring more than 1,000 others.  Go to article >>

1848: Communist Manifesto published.
1919: Grand Canyon National Park established.
Victor Hugo, b. 1802.
Johnny Cash, b.1932.

Earth has extra moons, and they may hold the secrets of our solar system’s past
Earth’s closest cosmic companions, known as ‘minimoons’ or ‘quasi-moons’, could hold the secrets to the history of our early solar system. Read More.

Bright-red pigment is one of the earliest examples of Bronze Age lipstick
The bright-red pigment is housed inside an “elegant and valuable” stone vial. Read More.

Atlantic’s hurricane alley is so hot from El Niño it could send 2024’s storm season into overdrive
Unusually high temperatures combined with the abatement of the El Niño southern oscillation could aid the formation of extreme hurricanes this year. Read More.

‘Everything has changed since Apollo’: Why landing on the moon is still incredibly difficult in 2024
More than 50 years after the Apollo era, major governments and well-funded private companies still struggle with lunar landing missions. Why is landing on the moon so hard in 2024? Read More.

Qubits are notoriously prone to failure — but building them from a single laser pulse may change this
Qubits are normally made from superconducting metals and need to be cooled to near absolute zero to avoid collapsing. But scientists just built an error-free “logical qubit” from a single laser pulse — and it works at room temperature. Read More.

‘Scandals and secrets’: On board the world’s most exclusive private residential ship
This luxurious vessel, home to multimillionaires and billionaires, is shrouded in secrecy. Read what it takes to buy a condo on board.

SAG Awards 2024: See who won
The 30th annual Screen Actors Guild Awards were held Saturday in Los Angeles, and the show streamed live globally on Netflix. These were the big winners of the night.

PHOTOS OF THE DAY

Geneva, Switzerland
A mockup of the new Renault R5 E-Tech electric model car at the French carmaker’s stand during a press day for the Geneva international motor show
Photograph: Fabrice Coffrini/AFP/Getty Images

Kent, UK
A dog enjoys the windy weather on Folkestone beach
Photograph: Gareth Fuller/PA

​​​​​​​Bandung, Indonesia
Children riding kadaplak in Kampung Pasir Angling. Kadaplak cars were a traditional means of transportation for farmers and are being reintroduced for public entertainment
Photograph: Ryan Suherlan/NurPhoto/Rex/Shutterstock
Market Closes for February 26^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1954, the New York Stock Exchange introduced its first major advertising campaign, with the theme “Own Your Share of American Business.”
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell 0.4% at 21,324.31 in Toronto.
The move was the biggest since falling 2.3% on Feb. 13 and follows the previous session’s increase of 0.4%.
Today, financials stocks led the market lower, as 8 of 11 sectors lost; 146 of 225 shares fell, while 77 rose.
Toronto-Dominion Bank contributed the most to the index decline, decreasing 1.1%. K92 Mining Inc. had the largest drop, falling 8.5%.
Insights
* This month, the index rose 1.4%
* The index advanced 5.5% in the past 52 weeks. The MSCI AC Americas Index gained 27% in the same period
* The S&P/TSX Composite is at its 52-week high and 14.1% above its low on Oct. 27, 2023
* The S&P/TSX Composite is up 0.3% in the past 5 days and rose 0.9% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 16.6 on a trailing basis and 17.1 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.1% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.4t
* 30-day price volatility rose to 12.40% compared with 12.35% in the previous session and the average of 10.05% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | -45.7982| -0.7| 6/21
Materials | -24.5187| -1.1| 10/40
Utilities | -18.3875| -2.2| 1/14
Communication Services | -10.2167| -1.3| 1/4
Real Estate | -7.1537| -1.4| 1/20
Consumer Discretionary | -5.7416| -0.7| 3/10
Health Care | -0.4130| -0.6| 2/2
Consumer Staples | -0.2143| 0.0| 5/6
Energy | 3.1100| 0.1| 27/14
Industrials | 4.0072| 0.1| 14/12
Information Technology | 16.5006| 0.9| 7/3
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
TD Bank | -11.3700| -1.1| 30.5| -5.7
RBC | -8.8250| -0.7| 178.6| -1.3
Enbridge | -8.0260| -1.2| 23.0| -2.6
Cameco | 2.8210| 1.7| 14.3| -3.4
Canadian Natural Resources | 5.9850| 0.9| 41.9| 2.5
Shopify | 15.5900| 1.8| -34.0| 1.6
US
By Rita Nazareth
(Bloomberg) — The stock market lost steam near record highs as traders braced for a barrage of economic data and remarks from Federal Reserve speakers that will help shape the outlook for interest rates.
Wall Street is also keeping a close eye on how the market will manage to absorb heavy Treasury and corporate sales amid month-end positioning. US yields rose after Monday’s auctions of two-year and five-year government notes. Meantime, blue-chip companies are expected to sell about $35 billion in bonds this week.
Those firms sold at least $153 billion of debt in the US in February — a record for the month — as they race to seize on investor demand amid a drop in borrowing costs.
As the economy comes back to the forefront, the Fed’s favored inflation gauge is projected to show the biggest increase in a year.
Thursday’s core personal consumption expenditures price index will likely highlight the bumpy path the central bank faces in achieving its 2% target.  
Following a jump in both the consumer and the producer price indexes, the PCE would also validate recent Fedspeak underscoring officials are in no rush to cut rates.
“Economic data will return to center stage,” said Chris Larkin at E*TRADE from Morgan Stanley. “After hotter-than-expected CPI and PPI readings earlier this month, more people may be looking to the PCE to for insight into the reinflation threat — and how it may influence the Fed’s timing of rate cuts.”
The S&P 500 fell to around 5,070. Alphabet Inc. sank amid renewed fears that the Google owner’s missteps in artificial intelligence are putting its search business at risk.
Nvidia Corp. closed at a new record while Amazon.com Inc. effectively joined the Dow Jones Industrial Average.
In late trading, Zoom Video Communications Inc. gained on a bullish earnings forecast.
Treasury 10-year yields rose three basis points to 4.28%.
Bitcoin jumped above $54,000.
Stock markets have room to extend gains beyond record highs if the economic outlook remains upbeat and investors pour money into recent laggards, according to Goldman Sachs Group Inc. strategists led by Cecilia Mariotti said.
The S&P 500’s run to an all-time peak has left investor positioning “extremely” concentrated in the so-called Magnificent Seven, they wrote.
While that does create the risk of a pullback, there’s also “space for bullish sentiment and positioning to be further supported, especially if we start seeing a more meaningful rotation out of cash and into risky assets and laggards within equities.”
“Now, as a result of the AI-induced surge, investors wonder if the market will top out or broaden out,” said Sam Stovall at CFRA. “We think it will broaden out – eventually, but not before investors feel assured that the Fed will not postpone the first rate cut beyond the second quarter of this year.”
Those who currently see the possibility of a rate hike are “are dead wrong,” according to Arthur Laffer Jr., president of Laffer Tengler Investments.
“Inflation would have to really jump (and consistently) for more than a quarter before the Fed would even consider raising rates at this juncture,” he noted. “Inflation has always been erratic month to month. If inflation stays elevated for longer or starts to rise, the Fed will sit pat for a while before bringing back the possibility of a rate hike.”
In his view, the worst-case scenario right now would be the Fed pushing out any rate cuts until the end of the second quarter to the beginning of the third.
HSBC strategists upgraded their view on global stocks to neutral from underweight, saying their decision to downgrade in January was “wrong” as they failed to predict the rally in artificial-intelligence stocks.
“Our message to investors is to continue to focus on the sectors and companies that are seeing growth,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “Tech, healthcare and selected discretionary names are seeing strong earnings growth and that is where we want to focus. This can also be outside the US as well.”
To Solita Marcelli at UBS Global Wealth Management, investors looking to boost portfolio diversification have a broad range of opportunities outside of US large-caps.
“For example, we have identified high-quality growth stocks in Europe that, in our estimates, offer similar earnings growth prospects as the ‘Magnificent Seven’ in the US, while India is among our most preferred region within emerging markets. We also see value in US small-caps and small- and mid-caps in Europe,” Marcelli noted.
It’s time for investors to move away from the view that the US is the only game in town, according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
The rally powered by AI has helped send the valuation gap between non-US equities and the S&P 500 Index to a 20-year low — turning geographic diversification into an “inexpensive hedge” against a market correction, she said.
“Consider rebalancing extreme over weights to US equities with some exposure to Japan, Europe and EM, including Brazil, Mexico and India,” she said.
A number of forecasters have raised their targets for equity benchmarks due to an optimistic outlook for corporate earnings, but profit margins might actually be peaking, according to JPMorgan Chase & Co. strategists led by Mislav
Matejka write margins are currently elevated by historical standards.
While earnings have kept up — with big beats in the fourth quarter — the year-ahead picture looks less stellar.
Analysts have marked down each of the four quarters in fiscal 2024, according to data compiled by Bloomberg Intelligence.
The projections still imply a solid 9.5% earnings-per share gain for the year.
Muted corporate demand for software and hardware, along with cost-cutting efforts to protect margins, will set the tone for report cards from Salesforce Inc., Dell Technologies Inc. and HP Inc. this week.
The three main drivers of corporate-earnings strength are expected to turn weaker as the year progresses, which will put pressure on stock prices, according JPMorgan Chase & Co.’s Marko Kolanovic.
The biggest sources of downside risk to profit margins and earnings are increasing net interest expenses, weakening pricing power for firms and a pickup in unit labor costs, he said.
Meantime, Jamie Dimon said problems in commercial real estate will be contained to “pockets” of the sector as long as the US avoids a recession.
Many property owners can handle the current level of stress, the JPMorgan chief executive officer told CNBC Monday. Lower valuations tied to higher interest rates is “not a crisis, it’s kind of a known thing,” he said.

Over the weekend, Warren Buffett’s Berkshire Hathaway Inc. said its cash pile scaled a new record as the billionaire investor decried a lack of meaningful deals that would give the firm a shot at “eye-popping performance.”
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Buffett, 93, said in his annual shareholder letter, which the company released alongside its results on Saturday.
To Nicholas Colas at DataTrek Research, while this reads as if Buffett is saying that global equities are fairly valued, the truth is more nuanced.
Being a “huge business,” Berkshire needs to take significant positions in large companies in order to “move the needle”.
Colas also highlighted the absolute absence of the words “artificial intelligence” in this year’s letter.
“There’s an old Wall Street saying which goes ‘never argue about investing with anyone who is far richer than you’,” Colas said.
“Warren Buffett deserves every bit of the respect he has earned over the decades,” Colas added. “Our own view is different from his, however, and it is based on the idea that tech-enabled growth is the only reliable driver of shareholder value aside from having a genius at the helm of a company like Berkshire.”

Corporate Highlights:
* US regulators issued a scathing report on Boeing Co.’s safety culture, putting further pressure on the company as it contends with the fallout from a near-catastrophic accident at the start of the year.
* Microsoft Corp., under mounting political scrutiny globally for its deep ties to OpenAI, has cut a deal with the startup’s primary competition in Europe. On Monday, the French company Mistral AI announced a “strategic partnership” with the US software giant.
* Members of the Walton family sold roughly $1.5 billion worth of Walmart Inc. stock at the end of last week as shares hovered near a record high.
* Charter Communications Inc. is exploring a takeover of smaller cable provider Altice USA Inc., according to people with knowledge of the matter.
* The US Federal Trade Commission, eight states and Washington DC sued to block Kroger Co.’s $24.6 billion acquisition of Albertsons Cos. Monday, arguing the tie-up would lead to lower wages for workers and higher prices for groceries.
* US aluminum producer Alcoa Corp. made a $2.2 billion offer to acquire its Australian joint-venture partner Alumina Ltd. to consolidate ownership of key upstream assets with long-term demand for the metal forecast to rise.
* Intuitive Machines Inc. sank after the spacecraft company said its lander, which successfully touched down on the moon last week, likely landed on its side.

Key Events This Week:
* BOE Governor Andrew Bailey speaks, Tuesday
* US Conf. Board consumer confidence, durable goods, Tuesday
* Michigan Republican and Democratic presidential primaries, Tuesday
* Reserve Bank of New Zealand policy decision, Wednesday
* Eurozone economic confidence, consumer confidence, Wednesday
* US wholesale inventories, GDP, Wednesday
* Fed’s Raphael Bostic, Susan Collins and John Williams speak, Wednesday
* G-20 finance ministers and central bank chiefs meet in Sao Paulo, Wednesday through Thursday
* Germany CPI, unemployment, Thursday
* US consumer income, PCE deflator, initial jobless claims, Thursday
* Fed’s Austan Goolsbee, Raphael Bostic and Loretta Mester speak, Thursday
* China official PMI, Caixin manufacturing PMI, Friday
* Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday
* BOE chief economist Huw Pill speaks, Friday
* US construction spending, ISM Manufacturing, University of
Michigan consumer sentiment, Friday
* Fed’s Raphael Bostic and Mary Daly speak, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 fell 0.4% as of 4 p.m. New York time
* The Nasdaq 100 was little changed
* The Dow Jones Industrial Average fell 0.2%
* The MSCI World index fell 0.3%
Currencies
* The Bloomberg Dollar Spot Index was little changed
* The euro rose 0.3% to $1.0851
* The British pound rose 0.1% to $1.2685
* The Japanese yen fell 0.1% to 150.68 per dollar
Cryptocurrencies
* Bitcoin rose 5.3% to $54,497.51
* Ether rose 2.4% to $3,183.59
Bonds
* The yield on 10-year Treasuries advanced three basis points to 4.28%
* Germany’s 10-year yield advanced eight basis points to 2.44%
* Britain’s 10-year yield advanced 13 basis points to 4.16%
Commodities
* West Texas Intermediate crude rose 1.4% to $77.57 a barrel
* Spot gold fell 0.2% to $2,032.22 an ounce

This story was produced with the assistance of Bloomberg Automation.
–With assistance from Molly Smith, Craig Stirling, Sagarika Jaisinghani, Tatiana Darie and Christopher DeReza.
Have a lovely evening.

Be magnificent!

As ever,

Carolann
Cooperation and friendship are two assets that can be had only by first giving them. -Andrew Carnegie, 1835-1919.

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