March 20, 2012 Newsletter
Dear Friends,
Tangents: First Day of Spring!
And while we deal with hail, wet snow and cold, my girlfriend in Toronto called me today to say they are expecting 26 degrees tomorrow.
Sweet spring, full of sweet days and roses,
A box where sweets compacted lie;
My music shows ye have your closes,
And all must die.
-George Herbert, Virtue, 1633
photos of the day
March 20, 2012
On the first day of spring in Germany a bumble bee collects pollen from a blooming crocus in the sun at a traffic island in Gelsenkirchen, Germany.
Martin Meissner/AP
In this picture taken with a fish-eye lens, people stand around the “luminous lace” light sculpture by designers Loop.pH in the Stone Hall during a press preview at what used to be the official residence of the late Princess Diana, Kensington Palace in London.
Matt Dunham/AP
Market Closures for March 20, 2012:
North American Markets
Market
Index |
Close | Change |
Dow
Jones |
13170.19 | -68.94 |
-0.52%
|
||
S&P 500 | 1405.52 | -4.23
|
-0.30%
|
||
NASDAQ | 3074.15 | -4.17 |
-0.14%
|
||
TSX | 12430.70 | -49.00 |
-0.39%
|
International Markets
Market
Index |
Close | Change |
NIKKEI | 10141.99 | +12.16
|
+0.12%
|
||
HANG
SENG |
20888.24 | -227.05 |
-1.08%
|
||
SENSEX | 17316.18 | +42.81 |
+0.25%
|
||
FTSE 100 | 5891.41 | -69.70 |
-1.17%
|
Bonds
Bonds | % Yield | Previous % Yield |
CND.
10 Year Bond |
2.281 | 2.290 |
CND.
30 Year Bond |
2.806 | 2.818 |
U.S.
10 Year Bond |
2.3591 | 2.3772 |
U.S.
30 Year Bond |
3.4454 | 3.4779 |
Currencies
BOC Close | Today | Previous |
Canadian $ | 1.00853 | 1.01336 |
US
$ |
0.99154 | 0.98682 |
Euro Rate
1 Euro= |
Inverse
|
|
Canadian
$
|
1.31122 | 0.76265 |
US
$
|
1.32241 | 0.75619 |
Commodities
Gold | Close | Previous |
London Gold
Fix |
1650.70 | 1663.90 |
Oil | Close | Previous
|
WTI Crude Future | 105.61 | 107.88 |
Market Commentary:
Canada
By Joseph Ciolli
March 20 (Bloomberg) — Canadian stocks fell for a second day as energy shares dropped with oil prices on forecasts that the U.S. will report crude stockpiles rose and growing concern that demand will slow in China.
Suncor Energy Inc., Canada’s largest oil and gas producer, decreased 1.2 percent. Teck Resources Ltd., the country’s largest base-metals and coal producer, retreated 2.3 percent as copper declined the most in two weeks. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, rose 3.9 percent after Canpotex Ltd., the North American potash cartel, signed a contract to supply the fertilizer to Sinofert Holdings Ltd. in China at the same price as the second half of last year.
The S&P/TSX Composite Index decreased 49 points, or 0.4 percent, to 12,430.70 in Toronto.
“The actions we’ve seen in China recently suggest that they might curb some demand” for oil, Daniel L. Bain, chief investment officer of Thornmark Asset Management Inc. in Toronto, said in a telephone interview. Bain oversees about
C$400 million ($402 million). “There has also been a conflict risk premium built into the price, and people might be seeing that as a bit excessive, especially if we see any sort of diplomatic resolution in the Middle East.”
The S&P/TSX slipped 0.1 percent last week as economic data from the U.S. helped commodity shares pare losses after China reported a smaller gain in exports than economists had forecast.
Energy and raw-materials companies make up 46 percent of Canadian stocks by market value, according to Bloomberg data.
Energy stocks in the S&P/TSX fell today as oil dropped before a report that will show crude stockpiles increased to a six-month high last week, according to the median estimate in a Bloomberg News survey. China, the world’s second-largest oil consuming country, increased motor fuel prices for the second time in less than six weeks. Gu Xianghua, deputy secretary general of China Association of Automobile Manufacturers, said the country’s vehicle sales may miss industry targets.
Suncor Energy fell 1.2 percent to C$33.05. Canadian Natural Resources Ltd., the country’s second-largest energy producer, slipped 1.9 percent to C$34.84. Nexen Inc., which develops and produces oil in Yemen, dropped 2 percent to C$19.05.
An index of diversified metal stocks in the S&P/TSX decreased after copper fell as swelling inventories and a slowing economy signaled slackening demand in China.
Lundin Mining Corp., which explores for and produces base metals in Europe, fell 3.5 percent to C$4.68. Teck Resources decreased 2.3 percent to C$35.74.
Industrial stocks in the S&P/TSX dropped, fueled by rail companies, as falling commodity prices and growing stockpiles reduced demand for their services. Concern is also growing over foreign demand after China’s government cut its target for annual economic growth this month to 7.5 percent from 8 percent.
Canadian National Railway Co., the country’s largest railroad, decreased 1.9 percent to C$77.46. Canadian Pacific Railway Ltd., the nation’s second-largest railroad, dropped 0.9 percent to C$76.92. Bombardier Inc., which makes trains and airplanes, fell 0.3 percent to C$4.05.
Viterra Inc., Canada’s biggest grain handler, fell 0.4 percent to C$15.91 after Glencore International Plc agreed to buy the company for C$6.1 billion to add grain assets in Canada and Australia. The C$16.25 a share purchase price is a 48 percent premium to Viterra’s closing price on March 8, the day before the company said it had received expressions of interest.
“The massive amount of cash on corporate balance sheets along with massive equity and debt issuances will lead to more M&A activity,” Bain said. “We’re already starting to see some action.”
Agrium Inc., a Calgary-based fertilizer producer that is a partner in the deal with Glencore, advanced 2.2 percent to C$87.60.
Potash Corp. jumped 3.9 percent to C$46.40 after Canpotex agreed to supply 500,000 metric tons of potash to Sinofert in the second quarter.
US
By Rita Nazareth
March 20 (Bloomberg) — U.S. stocks declined, snapping a three-day advance for the Standard & Poor’s 500 Index, as commodities fell on concern about a Chinese economic slowdown.
Industrial and commodity shares slumped as China raised fuel prices by the most in two years and BHP Billiton Ltd. said the nation’s steel production is slowing. Caterpillar Inc. and Alcoa Inc. dropped more than 1.5 percent. Adobe Systems Inc.
sank 3.9 percent as its profit forecast missed some estimates.
Bank of America Corp. jumped 2.9 percent. Tiffany & Co. surged
6.7 percent after forecasting profit that beat projections.
The S&P 500 retreated 0.3 percent to 1,405.52 at 4 p.m. New York time, after the benchmark measure yesterday advanced to the highest level since May 2008. The Dow Jones Industrial Average declined 68.94 points, or 0.5 percent, to 13,170.19 today. The Russell 2000 Index of small companies slumped 1 percent to 829.24. About 6.2 billion shares changed hands on U.S.
exchanges, or 6.5 percent below the three-month average.
“A Chinese slowdown is inevitable,” said Peter Jankovskis, who helps manage about $2.9 billion at Oakbrook Investments in Lisle, Illinois. “It’s possible that will take some of the heat out of commodities. Yet China is not the only growth story out there. China will continue to be an important player, but the U.S. economy seems to have found its legs.”
Equities fell as China is raising fuel prices for the second time in less than six weeks. The nation’s vehicle sales may miss industry forecasts this year as economic growth slows, an official from the China Association of Automobile Manufacturers said. BHP Billiton, the world’s biggest mining company, said China’s steel production is slowing. In the U.S., housing starts hovered in February near a three-year high.
The S&P 500 has rallied 12 percent this year amid better than estimated economic and corporate data. More than $3.6 trillion was restored to U.S. equity values since last year’s low for the benchmark gauge in October. The rally drove the index to about 14.6 times reported earnings yesterday, the highest valuation level since July.
Companies most dependent on economic growth had the biggest declines in the S&P 500. The Dow Jones Transportation Average retreated 1.3 percent. A gauge of homebuilders in S&P indexes dropped 1 percent as 10 of its 11 stocks fell.
Measures of industrial and commodity shares in the S&P 500 dropped more than 0.5 percent. Caterpillar, the world’s biggest maker of construction and mining-equipment, slumped 2.6 percent to $110.76. Alcoa Inc., the largest U.S. aluminum producer, slid
1.5 percent to $10.44. Peabody Energy Corp., the biggest U.S.
coal producer, declined 5.4 percent to $31.64.
Adobe sank 3.9 percent to $33.16. Excluding some costs, profit will be 57 cents to 61 cents a share in the second quarter, Adobe said. The midpoint of that range — 59 cents — missed the 60 cents predicted by analysts, according to data compiled by Bloomberg.
Walt Disney Co. dropped 0.5 percent to $43.24. The world’s largest entertainment company said the box-office disappointment “John Carter” will post a loss of about $200 million, possibly the biggest ever for a single film.
A rally in financial companies helped the S&P 500 trim a decline of as much as 0.9 percent. The KBW Bank Index added 0.4 percent. Bank of America rallied 2.9 percent, the most in the Dow, to $9.81. Morgan Stanley gained 1.7 percent to $20.41.
Jefferies Group Inc. climbed 2.3 percent to $19.49. The investment bank that surged by almost half during the fiscal first quarter reported a profit decline that was smaller than analysts estimated as net revenue climbed to a record.
Tiffany surged 6.7 percent to $73.27. The company is benefiting from stock-market gains that have prompted luxury consumers to resume jewelry purchases, a turnabout from January, when the retailer said weak spending from U.S. customers had slowed holiday sales.
Apple Inc. added 0.8 percent to a record $605.96. The Cupertino, California-based technology provider yesterday disclosed plans to pay a dividend and buy back $10 billion of stock.
Barton Biggs, the hedge-fund manager who increased bets on equities before the S&P 500 rallied this year, is getting more bullish.
“I’ve been gradually increasing and I’m up to 90 percent now,” said Biggs, referring to the proportion of his fund that benefits from higher share prices. He spoke in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “There is an awful lot of money that is out of stocks and in very low- yielding fixed-income instruments. I think the odds are that money is going to migrate back.”
Biggs, the founder of the Traxis Partners LP, said last month that his net-long position, a gauge of bullish versus bearish investments, in stocks is about 75 percent, up from 65 percent in January.
Treasuries rebounded today following the longest drop since 2006, with yields on 10-year notes falling to 2.36 percent. U.S.
stocks posted the best returns when 10-year Treasury yields rose to close to 4 percent, according to a study by S&P that tracked market performance since 1953.
The S&P 500 advanced 1.7 percent a month on average during periods when 10-year yields climbed to a range of 3 percent to 4 percent, according to data compiled by New York-based S&P.
That’s the best performance among six categories of rising yields studied by the firm. Stocks began to fall when yields exceeded 6 percent, the study found.
While rising yields tend to boost borrowing costs for companies and act as “a depressant in intrinsic value calculations,” they can also suggest a strengthening economy and prompt investors to switch to equities, according to Sam Stovall, S&P’s chief equity strategist.
“The ‘sweet spot’ for equity prices appears to be a rising rate environment between 3 percent and 4 percent, as a growing economy reduces unemployment while increasing corporate earnings, yet does not trigger growth-slowing efforts by the central bank,” Stovall wrote in a report yesterday.
Have a wonderful evening everyone.
Be magnificent!
All the responsibility of good and evil is on you. This is the great hope.
Swami Vivekananda, 1863-1902
As ever,
Carolann
We are now at a point in time when the ability to receive, utilize,
store, transform and transmit data – the lowest cognitive form – has
expanded literally beyond comprehension. Understanding and
wisdom are largely forgotten as we struggle under an avalanche
of data and information.
-Dee Hock, 1929-
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor