July 20, 2016 Newsletter

Dear Friends,

Tangents:

Today is Moon Day: on this day in 1969 the first human landed on the Moon.  Edwin E. (Buzz) Aldrin, the second man to set foot on the Moon in the Apollo ll mission, wrote this on June 20^th, 1969:

The blue colour of my boot has completely disappeared now into this – still don’t know exactly what colour to describe this other than grayish cocoa colour.  It appears to be covering most of the lighter part of my boot….very fine particles…

  [Later] The Moon was a very natural and pleasant environment in which to work.  It had many of the advantages of zero gravity, but it was in a sense less lonesome than Zero G, where you always have to pay attention to securing attachment points to give you some means of leverage.  In one-sixth gravity, in the Moon, you had a distinct feeling of being somewhere….As we deployed our experiments on the surface we had to jettison things like lanyards, retaining fasteners, etc., and some of these we tossed away.  The objects would go away with a slow, lazy motion.  If anyone tried to throw a baseball  back and forth in that atmosphere he would have difficulty, at first, acclimatizing himself to that slow, lazy trajectory; but  I believe he could adapt to it quite readily…

  Odour is very subjective, but to me there was a distinct smell to the lunar material – pungent, like gunpowder or spent cap-pistol caps.  We carted a fair amount of lunar dust back inside the vehicle with us, either on our suits and boots or on the conveyor system we used to get boxes and equipment inside.  We did notice the odour right away.

PHOTOS OF THE DAY

A tractor harvests a row of lavender at Lordington Lavender farm in West Sussex, southeast England, on Wednesday. Andrew Matthews/PA/AP

A Widow Skimmer dragonfly rests on a stick in Hart Park in Bakersfield, Calif., on Tuesday. Casey Christie/The Bakersfield Californian/AP

Market Closes for July 20^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian Pacific Railway Ltd. climbed to the highest level in eight months on earnings and a rebound in crude lifted energy producers to offset a slump in gold, as Canadian equities ended the day near the highest in a year.

     The S&P/TSX Composite Index rose 0.1 percent to 14,533.57 at 4 p.m. in Toronto. Trading volume was 5.9 percent lower than the 30-day average. 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.

     Canadian Pacific added 1.2 percent, closing at the highest level since December. The railroad operator reported second- quarter earnings that topped analysts’ estimates after reducing costs by cutting jobs and running longer trains.

     The railway stock drove a 1.9 percent gain in industrial shares as eight of the 10 main groups advanced. Energy producers rebounded as the price of crude erased losses to close 29 cents higher at $44.94 a barrel in New York. U.S. government data showed inventories dropped 2.34 million barrels last week, a record ninth straight decline.

     Canada is the second-best performing developed market in the world this year with a 12 percent advance, trailing only New Zealand. Mining stocks have fueled the resurgence, with a 53 percent increase amid a rebound in gold prices, the best such performance for the group in at least 30 years, according to data compiled by Bloomberg.

     The group slumped 3.9 percent Wednesday, the most since May, as copper led a drop among industrial metals. An advance in the dollar affects consumption as it reduces demand from other countries. Barrick Gold Corp. slumped 7.4 percent for the biggest drop among miners.

     Valeant Pharmaceuticals International Inc. added 4.6 percent for a third straight day of gains. The drugmaker got regulatory backing from the Food and Drug Administration for two new drugs.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks advanced, pushing to fresh records, as quarterly results from Microsoft Corp. and Morgan Stanley spurred optimism that corporate earnings can support further gains.

     Microsoft rallied to a three-month high after posting a better-than-predicted profit, boosting technology shares to the highest in almost 16 years. Morgan Stanley rose 2.1 percent as its earnings beat estimates, bolstered by a surprise gain in fixed-income trading revenue. Abbott Laboratories and Intuitive Surgical Inc. also gained on results that exceeded forecasts. Walt Disney Co. lost 1.3 percent after an analyst downgraded the shares.

     The S&P 500 Indexrose 0.4 percent to 2,173.02 at 4 p.m. in New York, its sixth all-time high in eight days. The Dow Jones Industrial Average gained 36.02 points, or 0.2 percent, to 18,595.03. The gauge advanced for a ninth session, the longest since 2013, to post a seventh consecutive record. The Nasdaq Composite Index increased 1 percent. About 6.2 billion shares traded hands on U.S. exchanges, 14 percent below the three-month average.

     “Markets have been resilient,” Quincy Krosby, a market strategist at Prudential Financial Inc. in Newark, New Jersey, said by phone. “Much of the data coming in and earnings announcements have been better than expected. The market is looking for clarity that companies are more positive about the second half of the year. We’ve been in earnings recession for so many quarters we’re now thinking about earnings as whether they’re ‘less bad.”’

     U.S. shares have recovered their losses following the U.K.’s decision to leave the European Union amid signs of strength in the economy and speculation that the Federal Reserve will take its time raising interest rates. Traders are pricing in less than even odds of a hike until March 2017, though bets on a move by this December have climbed to 48 percent from just 12 percent two weeks ago.

     The S&P 500 is up 6.3 percent in 2016 after a rebound from the worst-ever start to a year sparked by worries that slowing growth in China would spread and oil’s plunge to a 12-year low. Anxiety over the U.K.’s Brexit vote briefly derailed stocks last month before assurances that major central banks would act to counter ill effects from Britain’s secession helped usher equities to all-time highs.

     With stocks continuing to climb, investor nervousness has cooled. The CBOE Volatility Index, a measure of market turbulence known as the VIX, fell 1.7 percent today to 11.77, the lowest since August 2014.                        

     Of the S&P 500 firms that have released results so far this season, 78 percent beat earnings estimates and 61 percent topped sales projections. Still, analysts forecast profit at its members will drop 5.8 percent in the second quarter, which would make it a fifth straight decline, the longest streak since 2009. General Motors Co. and AT&T Inc. are among 34 companies set to release results on Thursday.

     “Microsoft has for a long time has been one of the bellwether stocks for the U.S. — it is reflective to some extent of the whole economy and can feed through,” said Frances Hudson, an Edinburgh-based global thematic strategist at Standard Life Investments. “I am seeing more greens than reds in terms of earnings beats, which seems relatively positive. Earnings season is definitely the main event right now.”

     In Wednesday’s trading, technology shares were the strongest performers among the S&P 500’s 10 main industries, led by Microsoft’s best rally since January. The tech group rose to the highest since September 2000. Health-care stocks climbed to their loftiest level in 11 months, bolstered by Intuitive Surgical’s rise to a record. Stocks perceived as defensive lagged, with utilities, consumer staples and phone companies declining.

     Joining Microsoft to support the rally in tech, Cisco Systems Inc. added 2.4 percent to take the network-equipment maker’s shares to the highest in more than eight years. Visa Inc. rose 0.8 percent to a five-week high before its earnings report scheduled for tomorrow, and Facebook Inc. advanced 1.1 percent to a record.

     Chipmakers climbed to their best levels in 15 years. Intel rallied 1.5 percent before its earnings report, while Micron Technology Inc. and Skyworks Solutions Inc. gained at least 1.7 percent. Marvell Technology Group Ltd. jumped 14 percent, the strongest in seven years, after its profit beat estimates. All 30 members of the Philadelphia Stock Exchange Semiconductor Index advanced more than 0.2 percent.

     Managed-care companies recovered from declines yesterday after Aetna Inc. said it’s ready to go to court if necessary to proceed with its $37 billion takeover of Humana Inc. Humana rose 3.3 percent, mostly reversing a slide Tuesday prompted by a report that regulators were poised to file lawsuits to block the deal. Aetna increased 1.2 percent, and Anthem Inc., which plans to merge with Cigna Corp., added 2.6 percent.

     Earnings news also helped industrials extend all-time highs, amid the sector’s 10th gain in 11 days. Cintas Corp. surged 9.7 percent to a record, its biggest climb in five years. The uniform company raised its profit outlook after quarterly results were better than predicted. Illinois Tool Works Inc. added 2.8 percent after also lifting its earnings forecast on better-than-estimated results.

     Weighing on the consumer-staples group, Kellogg Co. sank 5.4 percent, the worst drop in almost two years, amid diminished speculation over a potential takeover offer. Campbell Soup Co. slid 3.1 percent after lowering its 2016 sales forecast.

     Energy producers slipped 0.2 percent, even as crude rebounded after a government report showed stockpiles fell a ninth week, marking the longest stretch of declines on record. Halliburton Co. fell 1.6 percent after reporting quarterly sales that slid 43 percent compared to a year earlier. Chesapeake Energy Corp. and Anadarko Petroleum Corp. added at least 1.2 percent.

Have a wonderful evening everyone.

Be magnificent!

The world in its essence is the reconciliation of opposite forces.

These forces, like the right hand and left hand of the creator, act in perfect harmony,

and yet in opposite directions.

Rabindranath Tagore

As ever,
 

Carolann

We have perhaps a natural fear of ends.  We would rather be always on the way than arrive. 

Given the means, we hang on to them and often forget the ends.

                                                                                         -Eric Hoffer, 1902-1983

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