January 28, 2016 Newsletter

Dear Friends,

Tangents:

On this day in history:

On Jan. 28, 1986, space shuttle Challenger exploded 73 seconds after liftoff from Cape Canaveral, killing all seven crew members.

1980 – Canadian Caper – Ambassador Ken Taylor engineers escape of 6 US diplomats from Iran.

PHOTOS OF THE DAY

A tourist takes a photograph of a new clockwork lion statue in Trafalgar Square, London, Thursday. The statue raises awareness and funds for the Big Cats Initiative, which supports efforts to save big cats. Grant Pollard/Invision/AP

Monkeys on leashes perform Thursday ahead of the Chinese New Year of the Monkey, which falls on Feb. 8, in Hangzhou, Zhejiang province, China. Reuters

Market Closes for January 28^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose a third day, the longest winning streak of 2016, as crude prices surged to a three-week high on a report OPEC and other producers will meet to discuss a potential output cut.

     Encana Corp. soared the most in more than seven years. Canadian Natural Resources Ltd. and Crescent Point Energy Corp. jumped as all but one of 55 members in a gauge of energy producers advanced.

     Oil futures surged as much as 7.8 percent in New York after Russia’s Energy Minister Alexander Novak said meeting participants in February may discuss a Saudi Arabian proposal for all oil-producing countries to trim production by 5 percent, Interfax reported. Crude settled at $33.22 a barrel, up 2.9 percent, paring earlier gains after OPEC delegates said no talks were planned.

     The Standard & Poor’s/TSX Composite Index rose 1.7 percent to 12,591.93, a three-week high. The index has gained 3.7 percent in three days, paring a monthly decline to 3.2 percent.

     The Bloomberg Commodity Index ended little-changed Thursday after rebounding 2.2 percent in the previous two days as crude prices jumped and gold rallied to a three-month high. Canada’s resource-rich benchmark equity gauge had moved in line with the Bloomberg index of commodities prices every day since Jan. 15 until today, according to data compiled by Bloomberg.

     Potash Corp. of Saskatchewan Inc. rose 1.3 percent, reversing earlier losses that sent shares to their lowest level in more than eight years. The world’s largest fertilizer producer by market value cut its quarterly dividend for the first time since a 1989 initial public offering after a forecast of lower-than-expected earnings Thursday amid lower prices for crop nutrients.

     Valeant Pharmaceuticals International Inc. tumbled 9.2 percent to a November low. The drugmaker on Jan. 25 released a memo written by Chief Executive Officer Michael Pearson that offered little on his current condition or the timing of his return to work after taking a medical leave of absence with severe pneumonia. Health-care shares fell the most in the S&P/TSX, losing 8.5 percent.

     Bombardier Inc. sank 11 percent, extending a 25-year low, as the struggling aerospace manufacturer traded below C$1. Investors are losing patience with the company amid repeated delays and cost overruns in its C Series jet. The stock was one of the worst-performing in the S&P/TSX last year and has slumped 34 percent in January.

US

By Anna-Louise Jackson

     (Bloomberg) — U.S. stocks advanced, with energy shares leading a rebound sparked by rising crude-oil prices, as investors weighed corporate earnings and prospects for global growth.

     Equities whipsawed amid a slew of quarterly results on the reporting season’s busiest day, a session after the Federal Reserve said it’s monitoring global developments to assess their impact on U.S. growth. Facebook Inc.’s better-than-expected report sparked gains in technology, while Abbott Laboratories sank 9.3 percent, weighing on health-care shares after its forecast trailed estimates. Amazon.com Inc. fell in late trading while Microsoft Corp. rallied following their earnings reports after markets closed.

     The Standard & Poor’s 500 Index climbed 0.6 percent to 1,893.36 at 4 p.m. in New York, after swinging between a 1.1 percent gain and a 0.5 percent loss. The Dow Jones Industrial Average rose 125.18 points, or 0.8 percent, to 16,069.64. The Nasdaq Composite Index climbed 0.9 percent, rising from a three month low. About 8.8 billion shares traded hands on U.S. exchanges, 16 percent above the three-month average.

     “It’s no longer about whether we’re rebounding from the financial crisis back to normal levels,” said Jason Pride, the Philadelphia-based director of investment strategy at Glenmede, which oversees $30 billion. “It’s about whether growth is going to be sustained, how good is that growth and where is the market incorrectly placing value. The takeaway for the market from the Fed announcement yesterday is that they’re seeing growth as being a little slower and they definitely see the risks from possible contagion from China and what’s going on in the oil markets.”

     While oil’s direction has been a strong influence on equities, earnings results are gaining clout as the pace of the reporting season intensifies. Stocks dropped yesterday amid an Apple-led slump and Boeing Co.’s biggest decline in 14 years after outlooks from both companies disappointed. Caterpillar Inc. contributed to today’s revival, leading the Dow with a 4.7 percent gain after reporting better-than-estimated earnings as cost cuts blunted the effects of a commodities meltdown.

     Amazon slid 10 percent as of 4:44 p.m. after its holiday quarter profit and sales missed estimates, taking the shine off of a year marked by record earnings and an expansion of the company’s businesses. The Web retailer’s cloud-computing division had fourth-quarter sales of $2.4 billion, up 69 percent from a year earlier. Meanwhile, Microsoft gained 3.6 percent in late trading after posting better-than-projected sales and profit, fueled by cloud services and Office productivity programs.

     Investors are looking to earnings as a possible bright spot in the worst month for stocks in five years, down 7.4 percent. Analysts estimate profit at S&P 500 firms fell 6.3 percent in the fourth quarter, better than predictions a week earlier that called for a 7 percent slump. Of those that have already posted results, 80 percent beat earnings projections and 50 percent exceeded sales forecasts.

     Fed policy makers left interest rates unchanged yesterday and said they still expect to raise borrowing costs at a “gradual” pace, while watching to see the impact of the global economy and markets. The comments sent the probability of a March hike lower, to 14 percent from about one-in-four odds before the meeting.                          

     Since the Fed last month raised rates for the first time in almost a decade, turbulence in financial markets and a dimming of the outlook for worldwide growth have spurred investors to expect a slower rise in borrowing costs.

     Data today showed orders for business equipment fell in December by the most in 10 months. Orders for all durable goods slumped 5.1 percent, the most since August 2014. A separate report showed contracts to purchase previously owned homes rose less than forecast in December, indicating more tempered progress in residential real estate early this year.

     The Chicago Board Options Exchange Volatility Index fell 3 percent Thursday to 22.42. The measure of market turbulence known as the VIX is up 23 percent in January, its biggest monthly surge since a record jump in August.

     Among the S&P 500’s 10 main groups, energy companies rallied 3.2 percent and technology shares added 1.5 percent to pace the advance. Health-care companies slumped 2.3 percent, the only industry retreating today.

     Energy stocks rose to a three-week high, buoyed by stronger oil prices. Hess Corp. added 9.5 percent, the most since 2008, after reporting better-than-expected quarterly results yesterday. Kinder Morgan Inc. and Devon Energy Corp. each rose at least 8.4 percent.

     Crude rose as much as 7.8 percent after Russia’s energy minister said that OPEC and other producers may meet to discuss output, before paring gains as OPEC delegates said no talks were planned. The commodity closed 2.9 percent higher in New York.

     Facebook’s 16 percent rally was its best in more than two years and it closed at an all-time high of $109.11. Among other tech companies, PayPal Holdings Inc. rose 8.4 percent after its quarterly profit and revenue beat estimates, and Google parent Alphabet Inc. increased 4.3 percent, the most since October.

     Juniper Networks Inc. offset some gains within the tech group, tumbling 15 percent, the most in more than four years. The network equipment maker forecast earnings for the current quarter that missed estimates and said its chief financial officer is stepping down. EBay Inc. fell 12 percent, its steepest loss in seven years after sales stalled last quarter and the company’s first-quarter profit and revenue forecasts were below analysts’ estimates.                         

     Health-care companies sank to a four-month low, dragged down by Abbott’s worst drop since 2002. The largest maker of heart stents provided a profit forecast range that trailed analysts’ estimates, citing the impact of the stronger dollar and its struggling Venezuelan business.

     Biotech stocks saw even greater losses, as the iShares Nasdaq Biotechnology ETF tumbled 3.6 percent to the lowest since October 2014. The fund, which is down 22 percent in January, is on track for its worst month of performance since it was created in 2001.

     Incyte Corp. fell 9.6 percent after halting a mid-stage trial looking at an experimental drug for colorectal cancer, while Celgene Corp. lost 5 percent to its lowest since October 2014 after providing an outlook that disappointed investors.

     “Biotechs are running counter to the good day that oil is having and energy stocks are having,” said Tim Ghriskey, who helps oversee $1.5 billion as managing director and chief investment officer at Solaris Asset Management in New York. “The health-care sector is just taking it on the chin today and I think that’s a valuation issue.”

     Better-than-expected earnings results helped send Under Armour Inc. almost 23 percent higher, the strongest gain in two years. Meanwhile, United Rentals Inc. slumped 18 percent, the most since 2008, after forecasting sinking rental rates next year and UBS AG downgraded the stock to neutral from buy. Alliance Data Systems Corp. tumbled 19 percent, the most in seven years, after trimming first-quarter guidance.

Have a wonderful evening everyone.

Be magnificent.

Civilization, in the real sense of the term, consists not in the multiplication

but in the deliberate and voluntary restriction of the wants.

This alone promotes real happiness and contentment, and increases the capacity for service.

A certain degree of physical harmony and comfort is necessary, but above that level,

it becomes a hindrance instead of a help.

Therefore the ideal of creating an unlimited number of wants and satisfying them

seems to be a delusion and a snare.   The satisfaction of one’s physical needs, even the intellectual needs

of one’s narrow self,  must meet at a point a dead stop before it degenerates into physical

and intellectual voluptuousness.  A man must arrange his physical and cultural circumstances

so that they may not hinder him  in his service of humanity,

on which all  his energies should be concentrated.

Mahatma Gandhi

As ever,
 

Carolann

Our life always expresses the result of our dominant thoughts.

                                        -Soren Kierkegaard, 1813-1855

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