February 19, 2016 Newsletter

Dear Friends,

Tangents:

On Feb. 19, 1945, during World War II, some 30,000 United States Marines landed on the Western Pacific island of Iwo Jima, where they encountered ferocious resistance from Japanese forces. The Americans took control of the strategically important island after a month-long battle.

And….

1996 – Birth of the Toonie – Royal Canadian Mint puts $2 bimetallic Polar Bear into circulation.

The writer, Amy Tan was born on this day in 1952:

You see what power is – holding someone else’s fear in your hand and showing it to them. –Amy Tan.

PHOTOS OF THE DAYDaniel Andre Tande of Norway in action during Ski Jumping HS130 World Cup competition at the Lahti Ski Games, the Pre-World Championships, in Lahti, Finland, Friday. Martti Kainulainen/ Lehtikuva/AP

A surfer drops in on a large wave at Praia do Norte in Nazare, Portugal, Friday. The Praia do Norte beach has become a famous beach for big waves surfers around the world since Hawaiian surfer Garrett McNamara got a world record for the largest wave surfed in 2011. Rafael Marchante/Reuters

Market Closes for February 19, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell, snapping a four-day rally, as crude dropped below $30 a barrel and retail sales tumbled the most in more than five years.

     The Standard & Poor’s/TSX Composite Index dropped 0.9 percent to 12,813.42 at 4 p.m. in Toronto, trimming a climb this week to 3.5 percent. Canada’s benchmark equity gauge remains the best-performing developed market in the world in 2016 with a 1.5 percent decline, after being among the worst in the past year. The S&P/TSX slid into a bear market last month as crude prices collapsed due to a global supply glut.

     Car dealership operator AutoCanada Inc. dropped 1.9 percent while auto-parts makers Linamar Corp. and Martinrea International Inc. retreated at least 2 percent to lead consumer discretionary stocks lower as eight of 10 industries in the S&P/TSX declined.

     Canadian retail sales fell 2.2 percent in December, the fastest since 2010, with the decline exceeding all 20 forecasts in a Bloomberg News survey. Motor vehicle and parts sales fell 3.9 percent, including a 6.7 percent drop in a category that includes snowmobiles.

     Encana Corp. tumbled 11 percent as energy producers fell 1.3 percent for a second day of losses. New York crude returned to levels below $30 a barrel. U.S. crude supplies expanded to the highest level in more than eight decades, according to government data Thursday.

     Encana, along with Cenovus Energy Inc., had its debt ratings lowered to junk by Moody’s Investors Service as the prolonged price rout has sapped cash flows. Cenovus lost 2.9 percent.

     Valeant Pharmaceuticals International Inc. sank 9.6 percent, the biggest decline this year. David Maris, analyst at Wells Fargo Securities, said there are many “unanswered questions” about the company’s strategic direction and forecast as he initiated coverage of the stock with an underperform, the equivalent of a sell.

     Valeant, briefly the largest company in the S&P/TSX by market capitalization last year, has slumped 66 percent from an August high amid intense scrutiny from investors and lawmakers surrounding its pricing practices.

     Dream Office REIT surged 13 percent, the most since 2008, after saying yesterday it plans to sell about C$1.2 billion in assets in the next three years, and it cut its annualized distribution by 33 percent. The stock was also raised to an “action list buy” from “buy” at TD Securities.

US

By Anna-Louise Jackson and Jiayue Huang

     (Bloomberg) — U.S. stocks closed little changed to finish the strongest weekly advance since November, with gains in technology and consumer shares offsetting declines among commodity producers amid a drop in crude oil.

     Equities battled back from an opening selloff sparked by the slide in crude, erasing declines by late morning, though struggling to advance all day. Applied Materials Inc.’s 7.1 percent surge buoyed technology shares after it predicted sales this quarter that may beat analysts’ estimates. Amazon.com Inc. reversed losses, climbing 1.9 percent to help lead consumer shares higher. Boeing Co. fell for the first time in five days, losing 2.1 percent.

     The Standard & Poor’s 500 Index lost less than 0.1 percent to 1,917.78 at 4 p.m. in New York, slipping for a second day while still gaining 2.8 percent for the week. The Nasdaq Composite Index, rose 0.4 percent, wiping out an early drop of as much as 0.7 percent. The Dow Jones Industrial Average fell 21.44 points, or 0.1 percent, to 16,391.99. About 7.6 billion shares traded hands on U.S. exchanges, 7 percent below the three-month average.

     “We got overextended to the downside last week, we’ve had a pretty decent bounce off of those oversold levels and now we’re at an overbought condition,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “I’m not surprised to see a pullback yesterday and a continued pullback today.”

     Investors were able to mostly shrug off oil’s biggest drop in a week, with the impact not spreading deeply beyond energy and raw-materials shares, offering further evidence that once- tight market correlations were easing.

     West Texas Intermediate crude futures fell for the first time in three days, down 3.7 percent and below $30 a barrel in New York after U.S. crude stockpiles rose to the highest in more than eight decades.

     “The oil situation is really just a supply issue,” said Rob Lutts, president of Massachusetts-based Cabot Wealth Management Inc. “The demand for energy is still relatively robust globally. I think investors maybe start focusing on that and pulling away from the concept that low oil prices mean global trouble everywhere.”                        

     Equities had rallied in near-vertical fashion for three sessions, sending the the S&P 500 up more than 5 percent after the gauge last week reached the lowest level since April 2014, and the Nasdaq Composite Index came within 1 percent of reaching a bear market. The rebound was led by the year’s most beaten- down sectors, including banks, technology and retailer shares.

     The S&P 500 has cut its 2016 decline nearly in half, though it’s still down 10 percent from a May record and 6.2 percent this year amid signs of weakness in the global economy and falling commodity prices.

     Investors have been scrutinizing economic data for any signs that slower growth abroad, particularly in China, is spreading. A report today showed the cost of living in the U.S. excluding food and fuel increased in January by the most in more than four years, reflecting broad-based gains that signal companies may be getting some pricing power. Total prices were little changed, depressed by the continued plunge in energy costs.                          

     Following the data, traders increased the probability for another Fed rate increase this year. Odds of June boost in borrowing costs rose to 24 percent from 17 percent yesterday, and less than 6 percent a week ago. Chances for a December move climbed to 44 percent, up from 37 percent on Thursday.

     The Chicago Board Options Exchange Volatility Index fell 5.1 percent Friday to 20.53, down for fifth day, the longest stretch in more than four months. The measure of market turbulence known as the VIX has cut its February climb to less than 2 percent from a high of more than 39 percent on Feb. 11.

     Six of the S&P 500’s 10 main groups fell, with raw-material companies slumping 1.1 percent, while energy shares slipped 0.4 percent, trimming an earlier 2.2 percent retreat. Consumer discretionary and technology shares rose as much as 0.3 percent. Financial, health-care and industrials were little changed.

     Energy stocks extended a two-day loss to 2.1 percent on the selloff in crude. Southwestern Energy Co. tumbled 17 percent, its biggest decline in seven years. Murphy Oil Corp. fell 9.7 percent, on pace for its lowest since 2002, while Devon Energy Corp. extended a four-day rout of nearly 15 percent.

     Consumer discretionary shares rose, with travel-related companies Carnival Corp. and Priceline Group Inc. advancing more than 2.3 percent. Nordstrom Inc. slumped 6.7 percent, on track for the most in three months, after holiday results missed analysts’ estimates and the retailer gave a weak earnings forecast.                      

     Applied Materials was the biggest gainer among the tech group, capping its steepest climb since May 2014 and lifting other semiconductor companies amid its outlook. Lam Research Corp. and Qorvo Inc. added at least 2.9 percent. Outside of chips, Autodesk Inc. and Activision Blizzard Inc. climbed more than 4.5 percent.

     Real-estate companies were the strongest performers within the financial group, extending gains to a fifth day, the longest since November. Public Storage, Extra Space Storage Inc. and Essex Property Trust Inc. advanced more than 1.9 percent.

     An index of U.S. airlines increased to a one-month high as oil prices fell. United Continental Holdings Inc. rose 3.6 percent, up for a fifth day, the most in almost eight months.

     With the earnings season drawing to an end, about three- quarters of results from S&P 500 companies exceeded profit projections, while less than half have topped sales forecasts.Analysts estimate earnings at companies in the benchmark fell 4.5 percent in the fourth quarter and will continue to contract in the following two periods.

Have a wonderful weekend 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

As ever,

Carolann

You have to dream before your dreams can come true.

                            -A.P.J. Abdul Kalam, 1931-2015

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