July 18, 2016 Newsletter

Dear Friends,

Tangents:

July 18, 1976 – Montréal Olympics events begin; Nadia Comaneci, age 14, scores a Perfect 10 in gymnastics.

On July 18, 1936, the Spanish Civil War began as Gen. Francisco Franco led an uprising of army troops based in North Africa.

On this day in 1969, a car driven by Sen. Ted Kennedy plunged off a bridge on Chappaquiddick Island near Martha’s Vineyard. His passenger, 28-year-old Mary Jo Kopechne, died.

NUMBERS:

385
Record-setting wingspan (in feet) of what will be the world’s largest airplane.  The Strato-launch, built by Microsoft cofounder Paul Allen, is to lift rockets to 35,000 feet, where they will be drop-launched into space.

93
Speed (in petaflops) of the world’s fastest supercomputer, China’s Sunway TailhutLight, based in Wuxi.  It can perform 93,000 trillion calculations per second.

65.3
Million refugees and internally displaced people worldwide in 2015, more than there were after World War ll.

38,000
Approximate cost per day (in US dollars) for a US Secret Service detail to protect a presidential candidate.

1 in 7
Americans living in poverty, according to the International Monetary Fund, which said that the problem needs urgent attention.

8
Estimated percentage of students in the California State University system who are homeless.  It may be as high as 12 percent.

PHOTOS OF THE DAY

David Barber, The Queen’s Swan Marker, prepares to set off for Swan Upping, the annual census of the swan population on the River Thames, in a weeklong exercise where unmarked mute swans are now counted, rather than eaten, in a tradition exercised by the British Crown for nearly 900 years, at Sunbury, Southern England on Monday. Toby Melville/Reuters

A general view shows the crowd gathering on the Promenade des Anglais during a minute of silence on the third day of national mourning to pay tribute to victims of the Bastille Day truck attack in Nice, France. Eric Gaillard/Reuters

Members of the group Bikers for Trump head to a rally for Republican Presidential candidate Donald Trump at Settlers Landing Park in Cleveland, Ohio on Monday. John Minchillo/AP

Market Closes for July 18^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Number of the Day

$43 billion and $37 billion

The amounts foreign investors hold in lira-denominated bonds and in Turkish equities, respectively.

Canada

By Eric Lam

     (Bloomberg) — Canada’s largest insurance companies rose, helping boosting the nation’s benchmark equity gauge, as Ballard Power Systems Inc. jumped to the highest level in a year after agreeing to a $168-million deal to produce fuel cells in China.

     The Canadian equity benchmark S&P/TSX Composite Index added 0.4 percent to 14,532.4 at 4 p.m. in Toronto, following three weeks of gains. Trading volume was 40 percent lower than the 30- day average.

     Ballard Power soared 44 percent, the biggest gain since February 2015, after agreeing to a deal with Guangdong Nation Synergy Hydrogen Power Technology Co. to manufacture fuel cell stacks in China. The stacks will be built into buses and commercial vehicles in China in the agreement valued at about $168 million over five years. The gains today helped the stock wipe out declines for the year, with Ballard now up 20 percent.

     Barrick Gold Corp. and Silver Wheaton Corp. climbed at least 1 percent as raw-materials producers advanced as a group, leading gains among nine of 10 industries in the S&P/TSX. Gold futures for August delivery rose 0.1 percent to settle at $1,329.30 an ounce.

     Financial companies Manulife Financial Corp. and Sun Life Financial Inc. also each added 0.6 percent.

     Restaurant Brands International Inc., owner of Tim Hortons and Burger King, increased 4.1 percent, to the highest since August. OTR Global has raised its view on Burger King to positive amid strong consumer response to the fast-food chain’s two for $10 whopper meal.

     Energy producers ended the day with a 0.2 percent advance, reversing an earlier loss even as crude for August delivery fell 1.6 percent in New York, trading just above $45 a barrel after a failed coup in Turkey as shipments continued through the country. Telecommunications stocks were the only laggards in the S&P/TSX.

     North American markets are showing some resilience, shrugging off the conflict in Turkey with the U.S. benchmark S&P 500 Index trading at a record high after three straight weeks of gains. Global equities have rallied after a brief selloff in the wake of the U.K. Brexit vote, with the S&P/TSX trading at the highest level in a year.

     Raw-materials producers remain the top-performing industry in Canada this year with a 60 percent increase, the best such performance for the group in at least 30 years, according to data compiled by Bloomberg. Energy stocks have rallied 19 percent on a resurgence in commodities prices from crude to gold.

     Amid the volatility Canadian stocks remain more expensive than their U.S. peers, with a price-earnings ratio of 22.4 for the S&P/TSX about 11 percent higher than the S&P 500.

US

By Oliver Renick

     (Bloomberg) — The S&P 500 Index closed at a record for the fifth time in six days, as technology shares rallied amid deal activity while corporate earnings spurred optimism that results this season will be sturdy enough to help sustain equities at record levels.

     The Dow Jones Industrial Average closed at a record for a fifth straight session. SoftBank Group Corp.’s agreement to buy ARM Holdings Plc for $32 billion pushed semiconductor shares to a 15-year high, and Bank of America Corp. advanced 3.3 percent after posting higher profit in each of its four main businesses. Hasbro Inc. dropped 6.6 percent as sales in its boy-oriented toys disappointed. After the bell, Netflix Inc. tumbled as its quarterly results disappointed.

     The S&P 500added 0.2 percent to 2,166.89 at 4 p.m. in New York amid light trading, following three consecutive weekly gains. The Dow climbed 16.50 points, or 0.1 percent, to 18,533.05 to extend its longest winning streak in four months. The Nasdaq Composite Index surged 0.5 percent, bolstered by chip companies and Apple Inc.’s climb to a seven-week high. About 5.6 billion shares traded hands on U.S. exchanges, 22 percent below the three-month average and the lowest since March 28.

     “The focus for the market is on earnings, and more importantly guidance, focusing on the impact of the economy, elections, and how the dollar is influencing business conditions,” said Kevin Kelly, the chief investment officer at Recon Capital Partners in New York. “It’s hard for a market that is preoccupied on management’s every word to be influenced by Turkey.”

     Equity futures extended a drop on Friday after news that factions of Turkey’s army tried to overthrow the government of President Recep Tayyip Erdogan, but rebounded after the premier’s supporters put an end to the coup by Saturday.

     More than 90 S&P 500 companies report earnings this week. Analysts project a profit decline of 5.8 percent for the index in the second quarter, which would make it a fifth straight drop, the longest streak since 2009. Firms including JPMorgan Chase & Co. and Alcoa Inc. beat earnings estimates last week, sending shares higher.

     After Monday’s close, Netflix reported fewer new subscribers than predicted, as higher prices for some older customers spurred an increase in cancellations. The shares dropped 16 percent as of 4:39 p.m. International Business Machines Corp. rose 3.1 percent in after-hours trading as its revenue beat analysts’ estimates.

     The S&P 500 recovered all its losses following the U.K.’s vote to leave the European Union and rallied to four consecutive records through Thursday. Signs of strength in the economy combined with speculation the Federal Reserve will hold rates steady this year have helped boost equities from a three-month low on June 27. The main U.S. equity benchmark is up 6 percent this year and on pace for a fifth straight monthly gain, which would be the longest in two years.                       

     While bets for a Fed rate increase crept up amid improving economic reports, traders are still pricing in less than even odds of a move until mid-2017. Meanwhile, a Citigroup gauge that tracks the degree to which data are exceeding economist projections is at an 18-month high. Investors will scrutinize reports on housing starts, existing home sales, manufacturing and jobless claims this week for cues on the vitality of growth. A reading today showed confidence among homebuilders declined in July from a five-month high.

     “The markets look pretty resilient to the events in Turkey and the key is expectations about monetary policies,” said Christian Gattiker, head of research at Julius Baer Group Ltd. in Zurich. “There’s widespread expectation that central banks will stay supportive. Earnings are following the usual ritual in the United States, guiding down and then surprising to the upside.”

     In Monday’s trading, the CBOE Volatility Index fell 1.8 percent to 12.44, to an 11-month low. The measure of market turmoil known as the VIX is down about 52 percent from a four- month high on June 24.                         

     Technology shares led gains among the S&P 500’s 10 main industries, rising to the highest since December 4, while consumer-staples and industrial companies slipped less the 0.2 percent as the worst performers. Retailers paced a climb in consumer-discretionary stocks, and financials rebounded from a decline on Friday, paced by lenders after Bank of America’s results.

     Qorvo Inc. and Skyworks Solutions Inc. rose at least 1.9 percent as semiconductor and equipment stocks extended a climb to the highest since February 2001. Hard-drive maker Seagate Technology Plc increased 4.3 percent to a three-month high. Facebook Inc. added 2.2 percent for its best level since May 27.

     Coach Inc. gained 2.5 percent, among the strongest in consumer discretionary, after Robert W. Baird & Co. upgraded the shares to the equivalent of buy from hold. Amazon.com Inc. eked out a gain to snap its longest losing streak since March, while Dollar Tree Inc. and Macy’s Inc. increased more than 1.4 percent as retailers in the S&P 500 briefly flirted with an all-time high.

     Energy producers nearly wiped out a 0.9 percent dropping, slipping with oil as shipments continued through the vital conduit for oil from Russia and Iraq to the Mediterranean Sea following the failed coup attempt in Turkey. West Texas Intermediate crude futures sank 1.5 percent, after falling as much as 2.4 percent. Apache Corp. and Diamond Offshore Drilling Inc. lost at least 1.3 percent.

     Monster Beverage Corp. fell 3.8 percent, the most since February, to weigh on the consumer-staples group. Wells Fargo & Co. analyst Bonnie Herzog downgraded the stock, saying she expects softer results in the near term and a lack of new products.

     Merck & Co. declined 1 percent, among the most in the Dow, after BMO Capital Markets Corp. cut the shares to the equivalent of neutral from buy, citing continued pricing pressure.

     Among other shares moving on corporate news, GameStop Corp. had its biggest rally since January 2015, rising 7.9 percent, after Chief Executive Officer Paul Raines told CNBC that sales were up 100 percent in 462 stores that are “gyms” in the Pokemon Go app. The retailer is the largest distributor of Pokemon video games and collectibles, he said.

Have a wonderful evening everyone.

Be magnificent!

True civilization does not mean congregating in cities and living a foolish life,

but going Godward, controlling the senses, and thus becoming the ruler in this house of the Self.

Swami Vivekananda

As ever,
 

Carolann

I only want people around me who can do the impossible.

                                      -Elizabeth Arden, 1878-1966

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