November 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

People walk along a forest as the sun shines over fog near Albis Pass mountain pass, Switzerland on Thursday. Arnd Wiegmann/Reuters

A giraffe calf born on Aug. 31, 2015, stands in the foreground with other adult giraffes at the Singapore Zoo on Thursday in Singapore. The Singapore zoo is known for its efforts in promoting and educating the public about the importance of wildlife conservation through its educational programs and through the breeding of its animals in captivity which also include some endangered species. This is the Singapore Zoo’s first giraffe calf in 28-years. Wong Maye-E/AP

Market Closes for November 12^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — The resource-heavy Canadian stock benchmark fell to a six-week low after capping its longest losing streak since July, as concern that growth in Europe and China will hurt demand renewed a rout in commodities.

     Valeant Pharmaceuticals International Inc. contributed the most to declines in the benchmark index as the embattled drug maker tumbled to the lowest since 2013. Energy producers retreated as oil fell through $42 a barrel in New York to a two- month low.

     Canadian equities have been among the worst-performing in the world this year, led by declines in natural-resource and health-care stocks, as the country’s stock market has been hampered by a slump in oil prices, slowing overseas growth and the prospect of an interest-rate hike from the Federal Reserve.

     The Standard & Poor’s/TSX Index fell 214.75 points, or 1.6 percent, to 13,127.18 at 4 p.m. in Toronto. The benchmark equity gauge has lost 4.3 percent in its longest losing streak since July 27. The slump extended declines this year to 10 percent, trailing only Singapore and Greece among developed markets.

     Commodities tumbled as signs that global growth is slowing mounted. Data on Thursday showed industrial production in the euro area fell more than economists forecast. Earlier this week China data showed imports to the country slumped amid slowing demand for resources from heavy industries. China is Canada’s second-largest trading partner after the U.S.

     Manulife Financial Corp. lost 3.7 percent, the most in two months, after posting a 43 percent slide in third-quarter profit blamed on its slumping oil and gas investments. Manulife, Canada’s largest insurer, is one of more than 50 companies in Canada to report quarterly results Thursday. 

     Of the nearly 200 companies in the Standard & Poor’s/TSX Composite Index to report thus far in the current period, about 60 percent missed revenue estimates, according to data compiled by Bloomberg.

     Valeant dropped 6.4 percent, to a July 2013 low. Valeant, briefly the largest stock in Canada by market capitalization this year, has lost 72 percent from an Aug. 5 high amid pressure over how it prices its drugs. The drugmaker said in a conference call Tuesday that the decision to cut ties with pharmacy Philidor Rx Services would meaningfully affect its dermatology business.

US

By Kate Garber

     (Bloomberg) — U.S. stocks fell the most in six weeks as a rout in commodities pressured energy and raw-materials providers while investors braced for the first rise in interest rates since 2006.

     Chevron Corp. dropped 2.5 percent and miner Freeport- McMoRan Inc. sank 5.8 percent as the stronger dollar and a persistent slump in demand from China sent the Bloomberg Commodity Index to the lowest since 1999. The recent weakness in commodity shares is a turnabout after energy and raw-materials helped drive a rebound from a summer correction and in October had their strongest month in four years.

     The Standard & Poor’s 500 Index fell 1.4 percent to 2,045.97 at 4 p.m. in New York, slipping below its average price during the past 200 days for the first time in two weeks. The U.S. equity benchmark has struggled to hold gains after rallying to within 1 percent of a record on Nov. 3. The Dow Jones Industrial Average lost 254.15 points, or 1.4 percent, to 17,448.07. The Nasdaq Composite Index declined 1.2 percent. About 7.1 billion shares traded hands on U.S. exchanges, about 4 percent below the three-month average.

     “Tighter policy expectations coming out of the Fed has led to a mini rally in the dollar and inflation expectations seem fairly well-anchored so additional pressure on commodities is not really a surprise,” David Lafferty, the chief market strategist for Natixis Global Asset Management in Boston, said by phone. “The fact it’s all commodities seeing weakness tells you it’s a dollar and Fed-related story.”

     Federal Reserve officials today stressed that policy should be tightened only gradually after interest rates are increased for the first time in almost a decade, with New York Fed President William C. Dudley saying the conditions for liftoff “could soon be satisfied.”

     In addition to Dudley’s comments, Fed Bank of St. Louis President James Bullard said the U.S. central bank should raise interest rates from near zero because emergency policies are not needed with the labor market and inflation near to the central bank’s goals.

     Fed Bank of Chicago President Charles Evans said regardless of when it begins raising rates, the Fed must be clear that the pace of future increases will be gradual. Traders are now pricing in a 64 percent chance of a rate rise next month, up from odds of 27 percent less than a month ago.

     The S&P 500 has advanced just once in the seven sessions since Fed Chair Janet Yellen reminded investors that December’s meeting could bring the first rate increase in six years. Investors raised the probabilities of a Fed rate hike in December after a Labor Department report Friday showed 271,000 jobs were added in October, and the jobless rate fell to 5 percent.

     Data today showed applications for unemployment benefits were unchanged in the first week of November, signaling employers with a healthier appetite for hiring are also holding the line on firings. A separate report showed the number of positions waiting to be filled in the U.S. rose by 149,000 to 5.53 million in September from a revised 5.38 million in the month before.

     “With a hike in December looking almost certain, it’s only normal to see some flight away from risk assets,” said Pedro Ricardo Santos, a broker at X-Trade Brokers DM SA in Lisbon. “Earnings season is drawing to a close and a few companies have actually done better than expected — maybe the end of the year won’t be as bad as we thought.”

     Equity strategists project the index can squeeze out a further 5 percent of gain from today’s close to end the year at the 2,150 level, according to the average forecast compiled by Bloomberg. The advance would push the benchmark ahead of its May record and round up a fourth consecutive year of gains.

     With most S&P 500 members having already reported earnings this season, 73 percent beat profit expectations while only 44 percent topped sales projections. Analysts are now predicting a 3.8 percent drop in profits for the third quarter, an improvement on estimates for a 7.2 percent slide at the start of the season.

     All 10 major industries in the S&P 500 dropped today, with commodities shares tumbling more than 2 percent. The Chicago Board Options Exchange Volatility Index jumped 14 percent to 18.37, its highest level in a month. The measure of market turbulence known as the VIX is rebounding after its biggest monthly drop ever in October.

     “Fundamentals are taking a little bit of a back seat to some of the central bank talk and activity,” said Sean Lynch, co-head of global equity strategy for Wells Fargo Investment Institute. “We’re starting to see a little bit of cracks in emerging markets and some worries over the strength of the dollar. Certainly I think China is the big weight on commodities, but there’s other factors that are causing this headwind to commodities, like the dollar.”

     Energy companies in the benchmark index retreated 2.4 percent, falling for the sixth time in seven sessions. Oil dropped to the lowest level in more than two months after U.S. crude stockpiles increased for a seventh week, prolonging a global surplus. Exxon Mobil Corp. fell 2.7 percent, while ConocoPhillips and Valero Energy Corp. lost at least 2.4 percent.

     Freeport-McMoRan fell to its lowest since Aug. 26 amid its longest losing streak since that date, as the raw-material group had its worst drop in a month. Copper sank to its cheapest since 2009. Alcoa Inc. slid 3.2 percent to a two-year low, while International Paper Co. decreased 3.9 percent.

     Caterpillar Inc. was the worst performer among Dow components, declining 4.5 percent to fall the most in seven weeks. Canada’s Finning International Inc., the largest dealer of Caterpillar’s heavy machinery, announced plans to close plants and deepen workforce cutbacks amid slumping demand.

     Among other companies moving on corporate news, Advance Auto Parts Inc. shares dropped 15.4 percent, the most in three years, following weaker-than expected third-quarter results, and as the company said Chief Executive Darren Jackson will step down. The auto-parts chain has been under pressure from activist investor Starboard Value since late September.

     Kohl’s Corp. gained 6.1 percent, the most in nine months, after its quarterly profit and sales beat analysts’ estimates. The announcement was a surprise after Macy’s Inc., the largest U.S. department-store company, yesterday missed sales estimates and cut its profit outlook. Kohl’s advance today erases a 5.4 percent drop Wednesday amid the Macy’s fallout.

     Nordstrom Inc. climbed 1.9 percent, after rising as much as 3.5 percent, to recover part of its loss yesterday. Those gains may be short-lived. The shares tumbled 15 percent in late trading as of 4:41 p.m. after third-quarter earnings missed analysts’ estimates, renewing concerns about a slump in the department-store industry.

     Viacom Inc. rose 0.9 percent, despite underwhelming fourth- quarter results, after executives predicted increasing advertising revenue and higher affiliate fees. They pointed out that six of the media company’s top 10 networks are seeing audience growth. Shares earlier rose as much as 4.7 percent.

Have a wonderful evening everyone.

Be magnificent!

“A good life is when you assume nothing, do more, need less, smile often, dream big, laugh a lot, and realize how blessed you are.” — Unknown

As ever,

Karen

“Ability is what you’re capable of doing. Motivation determines what you do. Attitude determines how well you do it.” Lou Holtz

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7