July 11, 2014 Newsletter

Dear Friends,

Tangents:

On this day…

1960 “To Kill a Mockingbird,” Harper Lee’s Pulitzer Prize-winning novel, was published.

In 1914, Babe Ruth made his major-league debut in Fenway Park as a pitcher for the Red Sox. He pitched seven innings and led Boston to a 4-3 win over against Cleveland.

Something to note for the weekend:

On Sunday, Jane Goodall will introduce National Geographic’s Kingdom of the Apes, a fascinating look into the social structures of gorilla packs in the Rwandan mountains.  The clash between the oldest male, Titus, and his son, Rano, is a true story f the fight for leadership within the gorilla community.  The show highlights the remarkable similarities between gorilla conflicts and human power struggles.  It airs on Nat Geo Wild on July 13 at 9PM.

Photos of the Day

A group of riders cycles on its way during the 234.5 km seventh stage of the Tour de France cycling race from Epernay to Nancy, France. Jean-Paul Pelissier/Reuters

Native Brazilian with faces painted in the colors of the German national flag stand in front the news conference room of Germany’s national soccer team in the village of Santo Andre north of Porto Seguro, Brazil. Arnd Wiegmann/Reuters

Market Closes for July 11^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Oliver Renick

July 11 (Bloomberg) — Canadian stocks rose, with the benchmark gauge paring its worst weekly drop since May, as gains among gold miners offset a slump in energy stocks.

Barrick Gold Corp. jumped 3.8 percent and IamGold Corp. climbed 3.6 percent as miners rallied. Crew Energy Inc. and Legacy Oil + Gas Inc. dropped at least 3.7 percent as energy shares slid 1 percent as a group. Parex Resources Inc. surged 17 percent after saying its oil and gas reserves had increased.

The Standard & Poor’s/TSX Composite Index rose 0.1 percent to 15,125.50 at 4 p.m. in Toronto. The gauge has fallen 0.6 percent this week, the most since May 30, after closing at a record on July 9.

Canadian employment unexpectedly fell in June, with the second decline in three months led by the biggest drop in part- time work in almost two years. The country’s dollar fell with the last major data before Bank of Canada Governor Stephen Poloz’s July 16 interest-rate decision supporting his view there is plenty of slack in the world’s 11th largest economy.

Seven of the 10 main groups in the benchmark gauge rose today. Gold miners led raw-materials producers higher as the precious metal capped the longest run of weekly gains since 2011.

Barrick Gold jumped 4.8 percent to C$20.71 and IamGold rose 3.6 percent to C$4.36.

Parex Resources jumped 17 percent to a record C$14.87. The oil and gas explorer increased its proved plus provable reserves by 80 percent. At least two research firms, including Desjardins Securities, raised their rating on the stock.

Energy stocks lost the most, as West Texas Intermediate crude dropped to an eight-week low and capped a third weekly decline.

Crew Energy fell 3.7 percent to C$10.95 and Legacy Oil + Gas lost 3.8 percent to C$8.59. Painted Pony Petroleum Ltd. retreated 5.1 percent to C$12.17, the lowest in a month.

US
By Joseph Ciolli

July 11 (Bloomberg) — U.S. stocks rose, paring the biggest weekly loss since April, as a rally in Amazon.com Inc. and EBay Inc. led an afternoon rebound from declines spurred by concern over financial stress in Europe.

EBay and Amazon.com increased at least 2.3 percent amid optimism in the companies’ growth potential. Wells Fargo & Co. slipped after reporting per-share earnings that did not rise for the first time in 18 quarters. Fastenal Co. sank 4.2 percent after sales fell short of analysts’ estimates. Gap Inc. declined after same-store sales unexpectedly fell. Lorillard Inc. jumped 4.6 percent after Reynolds American Inc. said it’s in talks to buy the cigarette maker.

The Standard & Poor’s 500 Index rose 0.1 percent to 1,967.57 at 4 p.m. in New York after losing 0.3 percent earlier. It fell 0.9 percent this week. The Dow Jones Industrial Average added 28.74 points, or 0.2 percent, to 16,943.81. The Nasdaq 100 Index rose 0.6 percent. About 4.9 billion shares changed hands on U.S. exchanges today, 16 percent below the three-month average.

“People are going to keep one eye on earnings and one eye on peripheral debt,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said in a phone interview. “Debt concerns may trump earnings in the short-term, but as long as we have solid numbers for this quarter, markets overall should be fine.”

The S&P 500 fell 0.4 percent yesterday as signs of financial stress among Portuguese banks fueled concern over the strength of the European recovery. Portugal’s second-largest lender sought to reassure investors today by revealing its exposure to related companies after a missed payment on short- term debt by a member of the group.

The S&P 500 trimmed losses of as much as 1 percent yesterday amid speculation the day’s initial selloff was overdone. The gauge slipped 1.1 percent in the first two days of the week on concern equities had risen too far, too fast.

The S&P 500 ended last week at an all-time high, and the index has not had a drop of 10 percent in more than two years. The gauge trades at a valuation of 18 times reported earnings, the highest since 2010.

More than 140 companies in the S&P 500, including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Johnson & Johnson, will report quarterly results between now and July 23, according to data compiled by Bloomberg.

“With the start of earnings season, we’re expecting the U.S. to rebound,” Nick Skiming, who helps manage $10 billion at Ashburton Ltd., said by phone from Jersey, in the Channel Islands. “The U.S. is pretty clearly on the road to recovery. Their GDP, unemployment, and manufacturing figures are all fairly decent. From an economic view, it is the better place to put your money, a natural safe haven.”

The Chicago Board Options Exchange Volatility Index fell 4.1 percent today to 12.08. The gauge known as the VIX has surged 17 percent this week, its biggest rally since April. It finished last week at a seven-year low.

Profit at S&P 500 companies probably rose 4.5 percent in the three months through June, while sales gained 3.1 percent, analyst estimates compiled by Bloomberg show. The projections have decreased from the start of April, when analysts predicted a 7.3 percent jump in earnings and a 3.7 percent sales increase.

Earnings for banks are forecast to fall 3.9 percent in the second quarter, according to data compiled by Bloomberg. It’s the only sector expected to see declining profits, the data show.

Wells Fargo dropped 0.6 percent to $51.49. The bank reported quarterly profit of $1.01 per share, in line with estimates. The result ended a 17-quarter streak of rising per- share earnings at the bank.

All but two of the 10 main S&P 500 industries advanced today. Phone stocks climbed 0.8 percent to pace gains. Verizon Communications Inc. added 1.4 percent for the biggest jump in the Dow.

Whirpool Corp. increased 1.1 percent to $140.76. The Benton Harbor, Michigan-based company agreed to pay $1 billion for a controlling stake in Italian appliance maker Indesit Co., its largest acquisition since buying former rival Maytag Corp. eight years ago.

EBay rose 2.3 percent and Amazon.com jumped 5.6 percent to pace gains in the Dow Jones Internet Composite Index. The gauge capped its first weekly decline since May 9 as investors resumed selling earlier this week in some of the bull market’s biggest winners.

Sales at EBay grew more than 12 percent in June, data compiled by ChannelAdvisor show. Amazon.com’s sales have exceeded those for EBay by an average of 4 percent over the last four quarters, according to a Piper Jaffray Cos. report.

U.S. Steel Corp. climbed 3.2 percent to $27.64. The Obama administration imposed duties on steel pipe from South Korea and eight other countries in a victory for U.S. Steel Corp. and the United Steelworkers union, which said they were hurt by unfair competition from overseas, according to two people told of the decision.

Energy producers sank 0.8 percent, as crude oil declined for a third week. Chevron Corp. sank 1.4 percent to $128.47 for the biggest decline in the Dow.

Radian Group Inc. declined 5.4 percent to $13.77 and MGIC Investment Corp. plummeted 9.5 percent to $8.36. The two companies are among mortgage insurers that would need to fill a financial gap under new financial-strength rules proposed by the Federal Housing Finance Agency.

Genworth Financial Inc., which dropped 2.6 percent to $16.62, said yesterday that it may need as much as $550 million at its mortgage insurer to meet the standards by June 30, 2015.

Gap dropped 0.8 percent to $40.65. The biggest U.S. apparel-focused retailer said sales at stores open at least a year fell 2 percent in June, compared with a 7 percent gain in the year-earlier period. Retail Metrics Inc., a research firm that tracks the industry, had projected a 0.8 percent gain.

Rent-A-Center Inc. slid 11 percent to $25.88 after saying second-quarter adjusted earnings will be 36 cents to 38 cents a share, missing the average analyst prediction of 48 cents. The operator of rent-to-own electronics and furniture stores cited weaker-than-expected demand.

Fastenal retreated 4.2 percent to $46.15. The provider of industrial and construction supplies reported second-quarter revenue of $949.9 million, missing the average analyst estimate of $952.3 million.

Lorillard gained 4.6 percent to $66.01. The company confirmed the talks with Reynolds, the producer of Camel cigarettes. British American Tobacco Plc, the U.K. company which owns 42 percent of Reynolds, said it expects to support the transaction by subscribing for additional shares to maintain its stake. Reynolds lost 0.8 percent to $61.75.

Have a wonderful weekend everyone.

Be magnificent!

Though they may take various roads, all are on the way.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Even if you fall on your face, you’re still moving forward.

-Victor Kiam, 1926-2001

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7