August 21, 2013 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be sending the newsletter on her behalf.

Are you a creative person who loves to write? If so, Times Colonist has their 4^th Annual “So you think you can write” contest taking place.  Contestants must submit a 250 word story, poem or essay that includes the words arm, feature, harbour, press, tide and type.  Contestants have until September 12^th to submit their writing for a chance to win many great prizes! Good luck to all the writers out there!

“There are no mistakes. The events we bring upon ourselves, no matter how unpleasant, are necessary in order to learn what we need to learn; whatever steps we take, they’re necessary to reach the places we’ve chosen to go.” – Richard Bach

Photos of the Day –August 21^st, 2013

People ride all-terrain vehicles on the tundra as the sun sets near the Arctic community of Gjoa Haven, Nunavut. Chris Wattie/Reuters

Massive waves from approaching Tropical Storm Trami slam into breakwaters near Toucheng, north eastern Taiwan. Severe Tropical Storm Trami is bearing down on heavily populated northern Taiwan, prompting schools and offices to close. Up to 2 feet of rain is expected in some areas, and landslides could occur across the island. Wally Santana/AP

Market Closes for August 21^st, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 21 (Bloomberg) — Canadian stocks fell for the second time in three days as gold producers slumped the most in two weeks after minutes from the U.S. Federal Reserve’s July meeting showed policy makers support plans to slow stimulus.

Kinross Gold Corp. and Semafo Inc. sank at least 5.7 percent as the price of gold retreated. Niko Resources Ltd. Fell 8 percent after an analyst lowered his rating for the company due to concerns about its finances. Canadian Natural Resources Ltd. retreated 0.9 percent as crude declined to a two-week low.

Teck Resources Ltd. declined for a fourth day as the price of copper tumbled.

The Standard & Poor’s/TSX Composite Index fell 97.03 points, or 0.8 percent, to 12,573.08 at 4 p.m. in Toronto. The index has gained 1.1 percent this year. Trading volume was 2.5 percent lower than the 30-day average.

“Most investors had come to the conclusion tapering was happening one way or another, and this is just another confirmation,” Anish Chopra, a fund manager with TD Asset Management Inc., said from Toronto. His firm manages C$216 billion ($207 billion). “There’s still questions about the timeline, and the amount. Some investors may still have thought there was some division. That’s not a question anymore.”

Officials with the Federal Open Market Committee were “comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy improves, with a few saying tapering might be needed soon, minutes from their July meeting show.

Policy makers will also gather in Jackson Hole, Wyoming, this week to discuss monetary policy. About 65 percent of economists surveyed by Bloomberg News predict policy makers will taper stimulus in September.

“Our base-case assumption remains that the tapering will begin in October — with September still a possibility,” said Mark Chandler, head of Canadian fixed income strategy with RBC Capital Markets in Toronto, in a report this morning before the minutes were released.

Raw-materials producers slumped 3 percent as a group, the most since Aug. 6, declining the most in the S&P/TSX as all 10 industries retreated.

Semafo sank 7.2 percent to C$2.31 and Kinross Gold fell 5.7 percent to C$5.79 as gold for December delivery slipped 0.1 percent to settle at $1,370.80 an ounce. Gold has tumbled 19 percent this year. The S&P/TSX Gold Index lost 3.6 percent, the most since Aug. 6, after rallying to a four-month high yesterday.

Teck Resources, Canada’s largest diversified miner, fell 4.6 percent to C$26.28 for a fourth day of declines, the longest such streak since June. The stock has lost 9.6 percent since Aug. 15.

Copper prices slid 0.9 percent. A Chinese factory gauge due tomorrow from HSBC Holdings Plc and Markit Economics will show manufacturing continued to contract in August, economists surveyed by Bloomberg said.

Niko Resources slipped 8 percent to C$5.73 for a four-month low. Darren Engels, analyst with FirstEnergy Capital Corp. in Calgary, lowered his rating for the stock to market perform, the equivalent of hold, and dropped his price target to C$8.50 from C$14.

“There is far too much uncertainty regarding the company’s finances,” Engels said in a note to clients today.

Canadian Natural Resources retreated 0.9 percent to C$30.68 as crude declined 1.2 percent in New York. The U.S. Energy Information Administration said stockpiles fell by 1.43 million barrels last week. Analysts had forecast a decline of 1.5 million barrels.

BlackBerry Ltd. sank 2.5 percent to C$10.73 after Canada’s Industry Minister James Moore said the company must revive itself without help from the government.

“It’s for them to engage the market and provide devices and services, platforms, content that the market will receive well,” Moore said.

The Waterloo, Ontario-based smartphone maker announced it was forming a special committee to consider a possible sale on Aug. 12.

US

By Lu Wang and Alex Barinka

Aug. 21 (Bloomberg) — U.S. stocks fell, giving the Dow Jones Industrial Average its longest slump in 13 months, as minutes of the Federal Reserve’s July meeting showed officials support stimulus cuts this year if the economy improves.

Staples Inc. plunged 15 percent after declines in its retail and international business sparked in a reduction in its earnings forecast. Target Corp. slid 3.6 percent as profit fell 13 percent amid consumers’ caution in the face of higher taxes and unsteady employment. Lowe’s Cos. jumped 3.9 percent after the second-largest U.S. home-improvement retailer raised its full-year projection amid a housing recovery.

The Standard & Poor’s 500 Index lost 0.6 percent to 1,642.80 at 4 p.m. in New York, the lowest since July 8. The Dow dropped 105.44 points, or 0.7 percent, to 14,897.55. The measure retreated for a sixth day, the longest losing streak since July 2012. About 5.6 billion shares changed hands on U.S. exchanges today, 11 percent below the three-month average.

“The Fed minutes continue to show this clear uncertainty as to when the monetary tightening will begin,” Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco, said in a phone interview. His firm oversees $170 billion. “It will be a seminal moment when they move from the easing they’ve been in for years toward some incremental tightening steps. The minutes are quite clear in the sense that the Fed doesn’t know that we are there yet where the process can begin.”

The S&P 500 fluctuated after the Fed released its minutes at 2 p.m. in Washington, with the gauge at one point erasing losses of as much as 0.8 percent. Growing concern that the Fed would reduce stimulus this year contributed to the index’s 3.4 percent drop from a record close on Aug. 2 through yesterday.

Fed monetary support helped propel the benchmark gauge up more than 150 percent from its bear-market low in 2009.

The Federal Open Market Committee’s minutes from the July 30-31 gathering released today showed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year, with a few saying tapering might be needed soon. FOMC participants continued to expect economic growth to pick up in the second half of 2013 and “strengthen further.”

After the July meeting, policy makers affirmed a pledge to continue stimulus until seeing signs “the outlook for the labor market has improved substantially.” July hiring data, released after the meeting, showed the smallest jobs gain in four months and the lowest jobless rate in more than four years.

Data tomorrow is expected to show that initial jobless claims rose last week, according to estimates compiled by Bloomberg. A report today indicated that sales of previously owned U.S. homes climbed more than forecast in July to the fastest pace since November 2009 as more buyers entered the market.

Speculation about the stimulus has whipsawed stocks since May, when Bernanke first indicated cuts could start this year.

The benchmark index tumbled 5.8 percent from a record high on May 21 through June 24. It then rebounded as much as 8.7 percent to the latest closing record of 1,709.67.

“Everybody is edgy right now,” Mark Lehmann, president of JMP Securities LLC in San Francisco, said in a phone interview.

“People are not convinced about what to do, so you’re susceptible” to big intraday market swings like today, he said.

The Chicago Board Options Exchange Volatility Index, or VIX, jumped 6.9 percent to 15.94 today, the highest since July 3. The equity volatility gauge erased an earlier gain of 11 percent, falling as much as 1.6 percent before reversing.

Investors have also been keeping an eye on corporate earnings, which have helped the S&P 500 rally 16 percent this year through yesterday. Of the 474 companies in the S&P 500 that have reported results this period, 72 percent have posted profit that surpassed estimates, data compiled by Bloomberg show.

All 10 S&P 500 main industries fell today. Utility and phone stocks dropped the most, sliding 1.2 percent, as yields on 10-year Treasury notes traded near the highest level in two years, cutting demand for dividends.

Utility companies offer a dividend yield of 4.1 percent, ranking the highest among 10 industries after telephone stocks.

The two groups slumped more than 7.6 percent in the past three months, the most in the index.

Staples tumbled 15 percent, the most in more than two years, to $14.27. The world’s largest office-supplies chain, which suffers from waning consumer demand for products such as ink and toner and computer accessories, cut its outlook after second-quarter results were weaker than it expected.

Target dropped 3.6 percent to $65.50, the lowest since March 1. The second-largest U.S. discount retailer joins Wal- Mart Stores Inc. and Macy’s Inc. in reporting results that showed the bumpy economy and increased Social Security taxes are making consumers reluctant to spend beyond necessities.

PetSmart Inc. dropped 5.3 percent to $71. The pet-store chain forecast earnings of 83 cents to 87 cents a share in the third quarter. Analysts, on average, estimated 87 cents, according to a Bloomberg survey.

American Eagle Outfitters Inc. plunged 9.9 percent to $14.76. The clothing retailer’s second-quarter sales fell short of analyst estimates.

Goldman Sachs Group Inc. fell 1.5 percent to $157.11. A programming error caused the firm to send unintentional stock options orders in the first minutes of trading, pushing prices on dozens of contracts to a dollar each, according to a person briefed on the matter yesterday and data compiled by Bloomberg.

Any losses for Goldman Sachs, the fifth-largest U.S. bank by assets, won’t be known until exchanges determine which contracts should be canceled, said the person, who requested anonymity because the information is private.

Lowe’s rose 4.3 percent to $45.97. The second-largest U.S. home-improvement retailer posted second-quarter profit that topped analysts’ estimates and raised its forecast for the year as the housing recovery fuels spending on remodeling.

Garmin Ltd. climbed 5.6 percent to $40.59 for the biggest gain in the S&P 500. The largest maker of navigation devices was boosted to neutral from sell at Goldman Sachs.

Incyte Corp. surged 35 percent to $36.45, the highest since November 2000. The drugmaker said a Phase 2 study indicated its Jakafi inhibitor showed a benefit for treating patients with pancreatic cancer.

Have  a wonderful evening everyone.

Be magnificent!

“By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.”
Confucius

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.