May 3, 2016 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

A woman takes photographs of cherry blossoms in Sakura Park in Vilnius, Lithuania, Tuesday. The park opened in 2001 and was dedicated to Japanese diplomat Chiune Sugihara, who was ambassador to Lithuania during WWII. Mindaugas Kulbis/AP

People ride their bicycles by Arpoador beach, near the statue of Brazilian musician Tom Jobim, in Rio de Janeiro Tuesday. Sergio Moraes/Reuters

Market Closes for May 3^rd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell a second day for the biggest retreat in almost three months, joining a retreat in equities worldwide that was spurred by sluggish economic data.

     The benchmark S&P/TSX Composite Index sank 1.1 percent to 13,707.68 at 4 p.m. in Toronto, posting the steepest drop since Feb. 9. The S&P/TSX advanced for a third consecutive week on April 29 and remains one of the best-performing developed markets in the world this year. The gauge now trades at 21.2 times earnings, about 11 percent higher than the 19.2 times earnings valuation of the Standard & Poor’s 500 Index, data compiled by Bloomberg show.

     Canadian Western Bank, the Edmonton-based lender, sank 6.9 percent for the biggest slide since March 2015 after saying it would take about C$33 million ($26 million) in provisions for soured oil-and-gas loans in the second quarter, prompting one analyst to downgrade the stock. Financial shares contributed the most to the decline today out of 10 S&P/TSX groups.

     Encana Corp. sank 10 percent after reporting a first- quarter loss that was wider than expected, as energy and raw- materials producers each posted a 2 percent drop. Eight of 10 industries in the S&P/TSX fell with trading volume 14 percent higher than the 30-day average.

     Encana said its first-quarter operating loss was 15 cents a share compared with estimates for 12 cents, as cash flow sank 73 percent from the previous quarter. The company blamed the decline in energy prices, lower realized hedging gains, reduced liquids volumes and a one-time restructuring charge.

     Commodities prices from copper to crude fell after data showed a private gauge of Chinese manufacturing slipped in April. A Markit gauge for U.K. manufacturing also showed contraction, unexpectedly shrinking for the first time in three years in April. Stocks fell in the U.S. and Europe, while the dollar rose from a one-year low as Federal Reserve Bank of Atlanta President Dennis Lockhart called a June interest-rate hike “a real option.”

     Crude futures settled below $44 a barrel in New York ahead of weekly U.S. government data forecast to show rising stockpiles. Inventories are forecast to have increased by 750,000 barrels last week, according to the median estimate of a Bloomberg survey ahead of the report Wednesday.

     The resource-dominant S&P/TSX has sputtered to start the month of May, with commodities producers giving back some gains amid the uncertain outlook for global growth and speculation higher interest rates at the Fed will boost the dollar’s value. Raw-materials and energy producers are still the two top- performing industries in Canada so far this year.

US

By Joseph Ciolli and Dani Burger

     (Bloomberg) — U.S. stocks fell, with the S&P 500 sinking to a three-week low, amid rekindled angst over the sluggish pace of global growth and an uninspiring flow of corporate earnings.

     Weaker-than-forecast factory data today in the U.K. and China reminded investors of the worldwide malaise that had a hand in sending equities to their worst-ever start to a year. Commodity shares tumbled, with energy producers falling the most in eight weeks as crude oil retreated, while banks posted the biggest slide since April 7. Apple Inc. snapped its longest losing streak since 1998, and Pfizer Inc. rallied 2.7 percent on earnings that beat estimates and a boosted outlook.

     The S&P 500 declined 0.9 percent to 2,063.37 at 4 p.m. in New York, falling for the third time in four days. The index jumped 0.8 percent to begin the month on Monday in a recovery from the worst weekly drop since February. The Dow Jones Industrial Average lost 140.25 points, or 0.8 percent, to 17,750.91. The Nasdaq Composite Index fell 1.1 percent to seven- week low. About 7.9 billion shares traded hands on U.S. exchanges, in line with the three-month average.

     “The continued narrative is that the global economy is not very strong, even if the U.S. is the best of the bunch,” said Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research Inc. “We ran into congestion near the 2,100 area. We’ve had such a strong run-up over the last few months that we’re in a bit of a consolidation phase here.”

     A surge sparked by rising oil prices that helped the S&P 500 rebound as much as 15 percent from its February low faltered last week amid lackluster corporate results, scant signs of a pickup in economic growth and waning consumer confidence. The benchmark reached a four-month high on April 20, closing within 1.3 percent of the record set last May, and taking its valuation near a peak.

     With the season past its halfway mark, corporate results have so far failed to suggest a speedy recovery from what’s on track to be a fourth straight quarterly decline. Apple Inc., Microsoft Corp. and Alphabet Inc. all forecast sales in coming periods below analyst estimates, sinking large-cap technology shares even as Facebook Inc. and Amazon surpassed forecasts. Banks, however, used cost cuts to top predictions, helping financial shares post the second-strongest performance behind energy producers since the reporting period began.

     Analysts still project an 8.2 percent decline in first- quarter earnings for S&P 500 companies. Predictions call for a 4.8 percent drop in the current quarter, compared to forecasts for 3.7 percent growth when the year started.

     Economic releases are also in focus after the Federal Reserve kept its benchmark rate unchanged last week, and manufacturing data disappointed yesterday. A report on employment due Friday will be closely watched, as investors seek assurances on the stability of job growth which has been a source of strength in an otherwise tepid environment.

     Traders are now pricing in a 55 percent chance of higher borrowing costs in December, the first month with more than even odds for a boost. Fed Bank of Atlanta President Dennis Lockhart said today U.S. financial markets may be underestimating the odds of a central-bank rate increase in June, calling it “a real option.” Current bets show just a 12 percent chance the Fed will raise borrowing costs next month.

     In Tuesday’s trading, all of the S&P 500’s 10 main industries declined, with energy, financial and raw-materials companies — the strongest performers during the market’s 10- week rebound to a 2016 high — sliding at least 1.3 percent. Consumer staples and utilities, the biggest laggards during the rally were little changed.

     “Things had calmed down for the U.S. in March and April and now we’re in a mode where the market can’t make up its mind and is slipping back and forth,” said Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. “The weakening in energy is realistic. I’m not sure what’s supporting the price of crude at these levels, because it was driven up by rumors that the meeting at OPEC would lead to production quotas, and that fell apart.”

     The CBOE Volatility Index climbed 6.3 percent to 15.60, trimming a jump of almost 12 percent. The measure of market turbulence known as the VIX rose 13 percent in April, the biggest monthly gain of 2016.

     Energy companies in the benchmark decreased 2.2 percent, the worst since March 8, as the price of oil fell 2.5 percent before weekly data forecast to show rising crude stockpiles. Chesapeake Energy Corp. and Southwestern Energy Co. were the biggest losers, declining at least 6.8 percent, while Marathon Oil Corp. fell 5.6 percent. Halliburton Co. sank the most since February after reporting results that included charges related to the failed $28 billion merger with Baker Hughes Inc.

     The S&P 500 Financials Index lost 1.3 percent, reversing a 1.1 percent rally on Monday. Asset managers Legg Mason Inc. and Affiliated Managers Group Inc. decreased at least 3.2 percent. The KBW Bank Index slid 2 percent, its third decline in four days and the biggest drop since April 7. All 24 companies in the gauge fell more than 1 percent. JPMorgan Chase & Co. dropped 1.9 percent, one of the biggest drags on the S&P 500.

     General Motors Co. and Ford Motor Co. dropped more than 1.4 percent after their April sales missed estimates. The two pared earlier declines of more than 3 percent. Goodyear Tire & Rubber Co. lost 1.2 percent.

     FMC Corp. was the biggest gainers in the S&P 500 and a bright spot in raw-materials, rising 8.5 percent after reporting profit and revenue that exceeded analyst expectations. The pesticide company also increased guidance for full-year earnings. Meanwhile, Freeport-McMoRan Inc. tumbled more than 11 percent, the steepest in eight weeks, as copper slumped on concern demand for metals is weakening following sluggish manufacturing data around the world. Alcoa Inc. fell 5.6 percent.

     IMS Health Holdings Inc. announced that it will buy Quintiles Transnational Holdings Inc. in an all-stock transaction with an equity value of about $9 billion, bringing together two of the biggest providers of pharmaceutical industry data. IMS Health slipped 3.5 percent, while Quintiles fell 2.4 percent.

     Among other shares moving on corporate news, Mallinckrodt Plc surged 6.8 percent, combining with Pfizer’s gain to help the health-care group mitigate its losses. The drugmaker lifted its 2016 profit outlook as quarterly results exceeded estimates.

     Clorox Co. added 2 percent and briefly touched an all-time high after raising its full-year earnings and sales forecasts following results that beat analysts’ predictions. CVS Health Corp.’s quarterly profit also topped estimates, sending its shares up 2.4 percent, helped by higher prescription claims and the acquisition of a nursing-home pharmacy business.

Have a wonderful evening everyone.

Be magnificent!

“The best preparation for tomorrow is doing your best today.” H. Jackson Brown, Jr.

As ever,

Karen

 “Try to be a rainbow in someone’s cloud.” Maya Angelou

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