May 8, 2014 Newsletter

Dear Friends,

Tangents:

VE on this day in 1945.

Resurgent May, softness with energy,
Warmth after cold, reunion after loss.
It is a columbarium full of doves,
A susurration of the living leaves….

-Vita Sackville-West, The Garden.

Photos of the day

A bald eagle sits with it’s eaglet in a nest over the Raccoon River at Grays Lake Park in Des Moines, Iowa. Charlie Neibergall/AP

A surfer holding her board wades through the surf as clouds above are lit by the setting sun at Mollymook Beach on the south coast of New South Wales. David Gray/Reuters

Market Closes for May 8^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Gerrit De Vynck and Eric Lam

May 8 (Bloomberg) — Canadian stocks fell for the third time in four days as energy shares slid the most in almost a year after BlackPearl Resources Inc. cut its oil production forecast and crude prices declined.

BlackPearl, an oil and gas exploration company, retreated 9.5 percent. Crew Energy Inc. and Birchcliff Energy Ltd. fell at least 7.3 percent. Linamar Corp., a maker of auto parts, advanced 12 percent after reporting higher-than-estimated profit. Mitel Networks Corp. gained 13 percent after saying it would save more money from its merger with Aastra Technologies Ltd. than originally projected.

The Standard & Poor’s/TSX Composite Index fell 110.37 points, or 0.8 percent, to 14,546.03 at 4 p.m. in Toronto, the worst drop in four weeks. Energy stocks fell 2.2 percent as a group, the biggest decline since last June. The decline pared the industry’s gain this year to 13 percent.

“The market got very concentrated in the performance of energy and obviously it’s a profit taking wave that sort of fed on itself,” said Bob Decker, a fund manager at Aurion Capital Management Inc. in Toronto. His firm manages about C$6.6 billion.

West Texas Intermediate crude dropped, after rallying yesterday the most in a month, as supplies climbed to a seasonal record high amid weak demand.

“I don’t see anything fundamentally that changed dramatically other than the fact that stocks are overbought and it’s a technical correction,” Decker said. “Usually bull market corrections like this are short and sharp.”

BlackPearl Resources plunged 9.5 percent to C$2.77, the most since July. Macquarie Research cut its rating on the stock to neutral, the equivalent of a hold, from outperform. The company reported first-quarter production short of his projections, according to a note by analyst Chris Feltin.  “We see better growth from other mid-caps in our coverage,” he said.

Canada’s equity benchmark trades for 20 times reported earnings, the highest level since 2011, data compiled by Bloomberg show. The S&P/TSX has almost doubled since the bull market began in U.S. equities began in March 2009.

Linamar rose 12 percent to C$58.89, an all-time high. The company reported first-quarter profit of C$1.23 a share, exceeding analysts’ estimates of C$0.98. The stock is up 132 percent in the last year.

“There’s a scarcity of good-quality stocks in Canada that are growing at a rate like Linamar,” said Decker.

Mitel rose 13 percent to a record C$11.87. The communications equipment provider said it would save an extra $25 million on cost efficiencies from its acquisition of Aastra, according to a statement.

Lundin Mining Corp. gained 1.3 percent to C$5.50, and First Quantum Minerals Ltd. added 1.9 percent to C$20.74. Copper rose 0.9 percent in New York as data showed China’s exports and imports unexpectedly rose in April. The country is the world’s largest consumer of industrial metals.

Avigilon Corp., a maker of surveillance equipment, sank 15 percent to C$20.35 for a third day of losses. The company said earlier this week that Brad Bardua, the chief financial officer, resigned for health reasons. The stock has slumped 23 percent in the past three days.

US
By Joseph Ciolli

May 8 (Bloomberg) — Most U.S. stocks fell, after the Standard & Poor’s 500 Index climbed to within two points of a closing record, as technology shares erased a rally to sell off for a third straight day.

Amazon.com Inc. and E*Trade Financial Corp. slid more than 1.5 percent to pace declines among Internet stocks. Tesla Motors Inc. dropped 11 percent after saying tight battery supplies will continue to restrain growth. Keurig Green Mountain Inc. and 21st Century Fox Inc. added at least 6.5 percent as earnings topped forecasts.

The Standard & Poor’s 500 Index fell 0.1 percent to 1,875.63 at 4 p.m. in New York, after an earlier advance of as much as 0.6 percent. The Dow Jones Industrial Average rose 32.43 points, or 0.2 percent, to 16,550.97, briefly trading above its all-time closing record reached last week. The Nasdaq Composite Index dropped 0.4 percent, reversing an earlier rally of 1 percent. The Russell 2000 Index of small companies slumped 1 percent. About 6.8 billion shares changed hands on U.S. exchanges, in line with the three-month average.

“We continue to see this churning of the market and rotation out of hyper-growth names into value,” Walter Todd, who oversees about $975 million as chief investment officer at Greenwood Capital Associates LLC, said in a phone interview. “You see strength in the morning as people try to see if there’s going to be a breakout, and when that doesn’t occur, you see selling come in the afternoon.”

The Dow Jones Internet Composite Index lost 0.3 percent, erasing an earlier gain of 1.8 percent and adding to a 4.9 percent decline over the previous two days. Technology shares have led this year’s selloff of companies whose growth are more tied to economic swings after a rally drove valuations to about double that of the S&P 500.

The Nasdaq Composite is trading at 34.3 times reported earnings, compared with a multiple of 17.2 for the broad equity measure.

Selloffs in technology shares this week have been led by two of the country’s best-known stocks, Twitter, which has declined 18 percent as insiders were freed to sell stock, and Tesla Motors, which is down 15 percent for the week. An exchange-traded fund of social-media companies fell on eight of the past 12 days amid concern that user growth is slowing and valuations have become excessive.

Tesla plunged 11 percent to $178.59 today, its biggest decline since November. The electric-car maker said research and development costs will rise 30 percent in the second quarter and battery-cell supply will continue to constrain production through the first half before improving in the third quarter.

Amazon dropped for a third day, falling 1.5 percent to $288.32. E*Trade declined 2.1 percent to $21.23 for its third decline in the past four sessions.

Twitter climbed 4.2 percent to $31.96, while Groupon increased 6.1 percent to $5.66 after plunging 21 percent yesterday.

“There’s still some volatility ahead, and I’m still not trusting these tech stocks,” Chris Gaffney, senior market strategist at EverBank Financial in St. Louis, said in a phone interview. “Momentum stocks are still going to face some tough times going forward.”

The S&P 500 climbed yesterday as optimism that the Federal Reserve will continue to support the U.S. economy overshadowed the drop in Internet stocks. Chair Janet Yellen said in testimony to Congress that the central bank must continue to spur economic growth as indicators for inflation and employment remain far from the central bank’s goals.

In response to questions from senators today, Yellen defended the Fed’s accommodative monetary policies and said the central bank had no intention of raising its 2 percent inflation goal.

The Federal Open Market Committee last week pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely as the economy improves.

Jobless claims fell 26,000 to 319,000 in the week ended May. 3 from a revised 345,000 in the prior period, the Labor Department reported today. The median forecast of 52 economists surveyed by Bloomberg called for a decrease to 325,000.

European Central Bank President Mario Draghi indicated that officials are ready to cut interest rates next month. Officials are debating how much stimulus to give to a euro region economy haunted by the threat of deflation.

While Draghi gave no signal that radical moves such as quantitative easing are imminent, new economic forecasts next month may give them the scope to take interest rates into negative territory.

“It seems the market is making a big bet that the ECB is going to start a QE program pretty soon,” Matt Maley, a Boston- based equity strategist with Miller Tabak & Co., said in a phone interview.

Some 17 S&P 500-listed companies report earnings today. Of the more than 440 companies that have released results this season, 75 percent have beaten estimates for profit, while 53 percent have exceeded projections for revenue, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, gained 0.2 percent today to 13.43, reversing an earlier loss of 3.6 percent.

Utility and energy shares fell more than 1.2 percent for the biggest declines among 10 S&P 500 main industries. Transocean Ltd. slid 4.3 percent to $41.47, its biggest decline since February 2013, while Nabors Industries Ltd. fell 3.1 percent to $25.57. Phone companies had the best performance, rallying 1.5 percent.

DirecTV dropped 3.6 percent to $85.11. AT&T Inc., the second-biggest U.S. mobile-phone carrier, is in talks to buy the satellite-television company, people with knowledge of the situation said. AT&T climbed 1.8 percent to $36.40.

Keurig added 13 percent to $104.19. The maker of home- brewing machines expanded its base of North American customers last quarter and sold more drink packs to current users, Chief Executive Officer Brian Kelley said in a statement. Total sales climbed 10 percent to $1.1 billion in the period.

21st Century Fox jumped 6.5 percent to $34.22 after posting third-quarter profit that beat analysts’ estimates after drawing the largest-ever audience to the Super Bowl.

SolarCity Corp. rallied 12 percent to $53.60. The biggest U.S. solar power provider by market value raised its installation forecast for the year after demand for its rooftop systems jumped 78 percent in the first quarter.

Have a wonderful evening everyone.

Be magnificent!

You are unique as you are here and now.

You are never the same.  You will never be the same again.  You have never before been what you are now.

You will never be it again.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Ever tried.  Ever failed.

No matter.  Try again.

Fail again.  Fail better.

-Samuel Beckett, 1906-1989

Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7