January 12, 2015 Newsletter

Dear Friends,

Tangents:

Carolann is out of the office, I will be writing the newsletter on her behalf.

PHOTOS OF THE DAY

A dog runs during snowfall in winter with the air temperature around minus 7.6 degrees Fahrenheit at a park in Krasnoyarsk, Siberia on Monday. Ilya Naymushin/Reuters

Waves crash over the harbor wall as gale force winds hit Porthcawl in south Wales on Monday. Rebecca Naden/Reuters

Market Closes for January 12^th, 2015   

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell a second day as commodities plunged to a 12-year low, with crude prices tumbling after Goldman Sachs Group Inc. cut its price forecasts.

     Legacy Oil & Gas Inc., MEG Energy Corp. and Surge Energy Inc. plunged at least 11 percent. Canadian Western Bank and National Bank of Canada dropped at least 3.2 percent to pace declines among financials stocks in the Standard & Poor’s/TSX Composite Index. Amaya Inc. jumped 12 percent as the online gaming operator said it is considering proposals for one of its properties. Ebola drugmaker Tekmira Pharmaceuticals Corp. soared 56 percent after agreeing to a merger with OnCore Biopharma Inc.

     The S&P/TSX fell 119.91 points, or 0.8 percent, to 14,265.01 at 4 p.m. in Toronto. The benchmark equity gauge has dropped 2.5 percent this year.

     Legacy Oil & Gas sank 15 percent, MEG Energy retreated 11 percent and Surge Energy plunged 12 percent to C$2.52, the lowest since 2009, as all 66 members of the S&P/TSX Energy Index fell. The group lost 3.8 percent as five of 10 industries in the benchmark Canadian equity gauge retreated on trading volume 6.6 percent higher than the 30-day average.

     Canadian Natural Resources Ltd. declined 4.1 percent after cutting C$2.4 billion of 2015 capital spending, to C$6.2 billion due to the plunge in oil prices.

     The Bloomberg Commodity Index, which tracks a basket of global commodities prices, slumped 1.7 percent to a 2002 low.

     West Texas Intermediate crude plunged 4.7 percent to $46.07 a barrel in New York after a seventh weekly drop.

     Crude has to “stay lower for longer” and trade near $40 a barrel in the first half of the year if investment in shale is to be curtailed to re-balance the global market, according to Goldman analysts in a report.

     First Quantum Minerals Ltd. sank 6.5 percent and Teck Resources Ltd. dropped 3.5 percent. Copper fell in London, touching $5,966, the lowest since October 2009, on concern demand is weakening in China, the largest consumer of the metal, to the weakest since 1990.

     The economy in China is forecast to slow to 7 percent in 2015 from 7.4 percent last year, according to economists’ estimates compiled by Bloomberg.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks fell, after the Standard & Poor’s 500 Index posted its first back-to-back weekly retreats since October, as the continuing selloff in crude pulled down energy shares before the start of corporate earnings.

     Energy shares tumbled 2.8 percent, the most among 10 groups in the S&P 500, as crude dropped 4.7 percent. Tiffany & Co. lost 14 percent after the jewelry retailer lowered its annual forecast after sales declined during the holiday. SanDisk Corp. fell the most in almost six years after reporting preliminary results below its own estimates.

     The S&P 500 slid 0.8 percent to 2,028.26 at 4 p.m. in New York. Losses accelerated after the market’s open as the benchmark gauge fell through its average price for the past 50 days. The Dow Jones Industrial Average lost 96.53 points, or 0.5 percent, to 17,640.84. The Nasdaq 100 Index slid 1 percent as technology shares retreated. About 6.6 billion shares changed hands on U.S. exchanges, 4 percent below the three-month average.

     “When you get the kind of 1 percent moves we’ve had in both directions, there’s definitely still uncertainty out there and that’s usually not the sign of a healthy market,” Matt Maley, an equity strategist at Miller Tabak & Co. in Newton, Massachusetts, said by phone. “With earnings kicking off the question is going to be how much of the decline in energy company earnings is already priced in.”

     The index lost 0.7 percent last week, following a 1.5 percent drop the prior period, amid concern over sliding oil prices, falling U.S. wages and that the European Central Bank’s bond-buying plan won’t be enough to combat deflation.

     Investors were whipsawed during the week as the S&P 500 had up and down swings of more than 1 percent on three separate days, with an average daily move of 1.3 percent for the full week. The volatility stands in contrast to 2014, when the gauge fluctuated 0.53 percent on average each day for the calmest year in U.S. stocks since 2006.

     The S&P 500 has fallen 3 percent since a record in December amid sliding oil prices. That’s prompted analysts to cut their profit forecasts for companies in the index, with reductions spread across nine of 10 industry groups and energy producers seeing the biggest cut.

     “Markets have been volatile because they still haven’t made up their mind whether lower oil prices are positive for consumers and the overall world economy or whether it means more financial stress,” Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich, said by telephone. “This has been the tug of war between the two camps. We think it’ll be positive for consumption. We’re overweight in the U.S. this year.”

     Falling oil prices have damped inflation, leaving it below the Federal Reserve’s target even as the economy shows signs of accelerating.

     Equities extended declines in the final minutes of trading after Fed Bank of San Francisco President John Williams, who will vote on policy this year, said raising interest rates in June would be a close call amid “strong momentum” in the labor market and weaker wage gains.

     Fed Chair Janet Yellen told reporters last month not to expect the central bank to raise rates before the end of April, leaving expectations intact for a move around mid-year.

     Profit at companies in the benchmark gauge probably climbed 2 percent in the final quarter of 2014, and 2.8 percent this period, analysts forecast. That’s down from October estimates of 8.1 percent and 9.2 percent, respectively.

     Alcoa Inc. advanced 1.2 percent in late trading after reporting fourth-quarter profit that surpassed analysts’ estimates. The company typically unofficially kicks off the earnings season. Later this week, investors will weigh reports for clues on the health of the world’s largest economy, including retail sales, manufacturing in the New York region and industrial production.

     Schlumberger Ltd., which posts earnings this week, fell 3.9 percent. The world’s largest oilfield-services provider was cut to neutral, the equivalent of a hold, from buy at Goldman Sachs Group Inc.

     Other energy stocks also retreated after Goldman reduced its forecasts for global benchmark crude prices, predicting inventories will increase over the first half of this year. Oil needs to trade near $40 a barrel in the first half of this year to curb shale investments, the bank said. U.S. crude closed near $46 a barrel.

     “Many people are fearful that this is a sign of deflation coming,” Rob Lutts, chief investment officer at Salem, Massachusetts-based Cabot Wealth Management Inc., said via phone. “There’s a little bit more fear in the air and it revolves around things we can’t control, including overseas economies and concern over how fast they’re growing.”

     Exxon Mobil Corp. and Chevron Corp. plunged at least 1.9 percent today to lead declines in the Dow. Forty-two of the 43 members in the S&P 500 Energy Index retreated, as the gauge slumped 2.8 percent. Transocean Ltd. lost 3.7 percent for a 10th straight drop and the lowest level since 1995.

     In Europe, oil-and-gas producers tumbled 1.3 percent for the second-biggest drop in the Stoxx Europe 600, while an index of developing-nation energy companies slid 1.9 percent to pace losses in the MSCI Emerging Markets Index.

     Technology companies in the S&P 500 declined 1.3 percent as SanDisk lost 14 percent. The maker of data-storage chips for mobile devices reported preliminary quarterly revenue that trailed its own forecast on lower sales of retail and flash- technology products.

     Health-care companies declined 0.1 percent amid corporate deals.

     Foundation Medicine Inc. surged 95 percent to $46.74. Roche Holding AG will buy 5 million newly issued shares of Foundation for $50 each, then begin an offer for about half of the company’s existing stock for the same price. The offer is 109 percent above Foundation’s closing stock price last week.

     NPS Pharmaceuticals Inc. jumped 8.2 percent as Shire Plc said it will pay $46 a share in cash. That’s a 9.8 percent premium to NPS’s closing price on Jan. 9 and more than 50 percent higher than its close on Dec. 16, before news broke of Shire’s interest.

     Bristol-Myers Squibb Co. climbed 3.1 percent. The drugmaker said its Opdivo treatment showed better overall survival rates compared with docetaxel, a form of chemotherapy, in a study of patients with a type of lung cancer.

     Express Inc. surged 3.2 percent. The clothing chain boosted its forecast for fourth-quarter earnings and 2015 profit, saying business strengthened in December and the first week of January.

     Lululemon Athletica Inc. gained 6.8 percent. The yogawear maker boosted its forecast for fourth-quarter profit to at least 71 cents a share after previously projecting no more than 69 cents. Analysts estimated profit during the period would be 69 cents. The company also raised its forecast for fourth-quarter revenue.

Have a wonderful evening everyone!

Be magnificent!

“If opportunity doesn’t knock, build a door.” Milton Berle

As ever,

Karen

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7