May 12, 2016 Newsletter

Dear Friends,

Tangents:

Israel was established 68 years ago today.

Anne Frank was born on this day in 1929.

Florence Nightingale was born on this day in 1820.

Kate Hepburn was born on this day in 1907.

And because Edward Lear, the limericist was born on this day in 1812, it is LIMERICK DAY.

There was a Young Lady whose eyes,
Were unique as to colour and size.
When she opened them wide,
People all turned aside,
And started away in surprise.
                   -Edward Lear

Also on this day, in 1932, the body of Charles Lindbergh’s baby is found in Hopewell N.J., a short distance from the Lindbergh residence. Charles Augustus Lindbergh, Jr. was kidnapped from the family’s home more than two months earlier. The crime and subsequent trial captured the world’s attention.

PHOTOS OF THE DAY

Solar Impulse 2, a solar powered airplane piloted by Swiss adventurer Bertrand Piccard, takes off from Phoenix Goodyear Airport on Thursday. Solar Impulse 2 took off from Arizona at 10:05 AM UTC, 12:05 PM CET, 3:05 AM local time for a journey that is expected to last 17 hours and 50 minutes until landing in Tulsa, Oklahoma. Jean Revillard/SI2/Reuters

A girl watches as Israeli Air Force CH-53 helicopters fly over the Mediterranean Sea during an aerial show as part of the celebrations for Israel’s Independence Day marking the 68th anniversary of the creation of the state in Tel Aviv, Israel on Thursday. Baz Ratner/Reuters

Market Closes for May 12^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks ended the day flat, as a retreat by natural-resource producers was offset by gains in energy after crude settled at a six-month high. Oil rebounded amid signs of a reduction in global supply while Canadian oil- sands production is coming back online.

     The benchmark S&P/TSX Composite Index lost less than an index point to 13,787.80 at 4 p.m. in Toronto, erasing an earlier advance of as much as 0.7 percent. Four of 10 industries in the S&P/TSX declined. Volume was 4.9 percent lower than the 30-day average. The gauge now trades at 20.9 times earnings, about 9.3 percent higher than the 19.2 times valuation of the S&P 500, data compiled by Bloomberg show.

     Crescent Point Energy Corp. jumped 4.9 percent for a third day of gains. The company reported a first-quarter loss narrower than analysts had forecast. Energy producers ended higher after swinging between gains and losses.

     Oil futures in New York swung between gains and losses, adding 47 cents to settle at $46.70 a barrel for a six-month high. Nigeria said militants have curbed the country’s oil output by about 30 percent, while Canadian oil-sands producers are starting the process of resuming operations after wildfires around Fort McMurray in Alberta disrupted production in the past week.

     Raw-materials producers slumped 1.8 percent, the second- most in the S&P/TSX. Barrick Gold Corp. lost 1.9 percent while First Quantum Minerals Ltd. retreated 5.3 percent to lead base- metals producers lower. Gold futures fell as the dollar rose after trading little changed against a basket of 10 currencies. The greenback strengthened against the yen amid speculation of further monetary easing by the Bank of Japan.

     Goldcorp Inc. tumbled 3.9 percent after agreeing to buy Kaminak Gold Corp. in a share-swap deal worth C$520 million ($406 million). The purchase price values Kaminak at a 40 percent premium to its 20-day average, and will involve Goldcorp issuing about 21.6 million shares.

     Health-care stocks lagged the most as Valeant Pharmaceuticals International Inc. dropped 5.6 percent. The stock has slumped 30 percent during a seven-day slide, the longest losing streak for the embattled drugmaker in almost two years. 

     Valeant’s new CEO Joseph Papa was criticized by the leader who took over his previous company. As well, most U.S. hospitals are not receiving promised discounts of as much as 30 percent for two heart medications that have seen steep price increases, despite Valeant pledging to Congress to do so, the New York Times reported.

US

By Dani Burger

     (Bloomberg) — U.S. stocks closed little changed in a whipsaw session, as rising oil prices bolstered an afternoon rebound while a selloff in Apple Inc. was offset by gains in Monsanto Co.

     Apple fell to a 22-month low after a report fueled speculation iPhone sales continue to slump. Monsanto jumped 8.4 percent as people familiar with the matter said Bayer AG is exploring a potential bid for its U.S. competitor. Kohl’s Corp. sank 9.2 percent after its earnings and sales results missed predictions, adding to worry that consumers haven’t loosened spending habits even as economists forecast that a government report Friday will show the biggest gain in retail sales in 11 months.

     The S&P 500 fell less than 0.1 percent to 2,064.11 at 4 p.m. in New York, after swinging between gains and losses. The worst of the days declines halted at the index’s average price during the past 50 days. The Dow Jones Industrial Average rose 9.38 points, or 0.1 percent, to 17,720.50, after losing nearly 86 points. The Nasdaq Composite Index lost 0.5 percent amid Apple’s slump. About 7.1 billion shares traded hands on U.S. exchanges, 5 percent below the three-month average.

     “The markets have expended a lot of energy to stay flat,”  said Eric Wiegand, senior portfolio manager at the Private Client Reserve of U.S. Bank in New York, which oversees $125 billion. “It really is like trying to tread water in a very choppy environment. We’re seeing a lot of rotation beneath the surface. We’re not surprised by volatility. Not just some downside volatility like yesterday, but the potential for upside price movements as well.”

     A roller-coaster week continued as equities struggled to regain upward momentum that has remained elusive since the S&P 500 reached a four-month high three weeks ago. The benchmark rallied the most in two months on Tuesday amid a rebound in commodities, only to dive yesterday after disappointing results from Walt Disney Co. and Macy’s Inc. battered consumer shares and sparked a broader selloff.

     With Apple souring sentiment in the tech group, semiconductor shares fell to a two-month low. Micron Technology Inc. and Skyworks Solutions Inc. dropped at least 4.5 percent, while Intel Corp. fell 1 percent. Elsewhere, Allergan Plc and Gilead Sciences Inc. lost at least 1.3 percent to pace a slide in health-care. The Nasdaq Biotechnology Index sank 1.7 percent, bringing its two-day retreat to 4.7 percent.

     Stocks have churned after the S&P 500 last month reached the highest level since Dec. 1 and came within 1.4 percent of a record set a year ago. The gauge surged as much as 15 percent from a 22-month low in February as crude rebounded, weakness in China showed signs of stabilizing and central bankers signaled they’ll maintain efforts to boost growth. Since the recent high on April 20, the benchmark has ambled in 70-point range as tepid earnings and economic data cooled investors’ risk appetite.

     A report today showed applications for unemployment benefits unexpectedly increased to the highest level since February 2015, signaling a more modest recovery lies ahead as companies adjust headcounts after a first-quarter slowdown in demand. The government’s retail sales data due on Friday are forecast to show a rebound for April after unexpectedly declining in March. Readings on consumer sentiment, producer prices and business inventories are also scheduled for release tomorrow.

     Weaker-than-predicted monthly payrolls figures last week helped push back expectations for Federal Reserve rate increases, with traders pricing in only a 4 percent chance the central bank will act in June. December is now the first month with at least even odds of higher borrowing costs.

     Boston Fed President Eric Rosengren sounded a hawkish note today, saying recent data warrant continued gradual rate increases and policy makers could risk stoking a bubble in the commercial real estate market if they delay action for too long.

     With the earnings season drawing to a close, analysts estimate income at S&P 500 companies fell 7.4 percent in the first quarter. Among the 90 percent members that have announced results so far this season, 75 percent beat profit forecasts, and 54 percent exceeded sales expectations.

     “Part of what’s helping the market is that investor expectations on earnings are generally not so high,” said Frances Hudson, a global thematic strategist at Standard Life Investments in Edinburgh. “Retail sales will be an important indicator tomorrow, as the U.S. consumer has been stalwart to the economy.”

     The CBOE Volatility Index fell 1.9 percent Thursday to 14.41, wiping out a climb of as much as 5 percent. The measure of market turbulence known as the VIX is down 8 percent this month after rising 13 percent in April.

     In Thursday’s trading, seven of the S&P 500’s 10 main industries advanced, with phone, raw-material and consumer staples companies rising at least 0.4 percent. Health-care shares lost 0.6 percent, while the technology group slipped 0.4 percent after falling as much as 1.1 percent.

     Monsanto’s strongest rally since August boosted the raw materials group. The potential takeover by German competitor Bayer looks to extend a record-setting pace for consolidation in the chemical sector, as low crop prices drive mega-deals in agriculture. Sealed Air Corp. gained 2.5 percent after Goldman Sachs Group Inc. rated the shares a buy.

     Industrial stocks fell for the third time in four days, with airlines weighing the most. The Dow Jones Transportation Average marked the biggest back-to-back decline since Jan. 8, with air carriers pummeled for a second day. JetBlue Airways Corp. and United Continental Holdings Inc. slid more than 4.4 percent, while a Bloomberg index of U.S. airlines dropped to a three-month low.

Have a wonderful evening everyone.

Be magnificent!

Where we suffer we have made it into a personal affair.

We shut out all the suffering of mankind.

Krishnamurti

As ever,

Carolann

Well done is better than well said.

 -Benjamin Franklin, 1706-1790

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