October 21, 2016 Newsletter

Dear Friends,

Tangents:

The Colder the Air

We must admire her perfect aim,
this huntress of the winter air
whose level weapon needs no sight,
if it were not that everywhere
her game is sure, her shot is right.
The least of us could do the same.

The chalky birds or boats stand still,
reducing her conditions of chance;
air’s gallery marks identically
the narrow gallery of her glance.
The target-center in her eye
is equally her aim and will.

Time’s in her pocket, ticking loud
on one stalled second.  She’ll consult
not time nor circumstance.  She calls
on atmosphere for her result.
(It is this clock that later falls
in wheels and chimes of leaf and cloud.)
                         -Elizabeth Bishop
PHOTOS OF THE DAY

Fog blankets the south tower of Golden Gate Bridge on Friday in San Francisco. Eric Risberg/AP

People brave the wind on the waterfront of Victoria Harbor as Typhoon Haima approaches Hong Kong on Friday. Typhoon Haima churned toward southern China after smashing into the northern Philippines with ferocious wind and rain, triggering flooding, landslides and power outages. Vincent Yu/AP
Market Closes for October 21st, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By John Hyland
     (Bloomberg) — Canadian stocks extended a rally to a fifth day and headed for the best week since March as Tourmaline Oil Corp. paced gains among energy shares and banks advanced on signs inflation is picking up.
     The S&P/TSX Composite Index gained 0.3 percent to 14,893.63 at 10:36 a.m. in Toronto. The gauge has rallied 2.1 percent in the week to the highest level since June 2015. Rallies among energy producers and miners have propelled the gauge to a 14 percent increase this year, making it the top performing developed equity market in the world, ahead of the U.K. and New Zealand.
     Energy producers, Canada’s second largest sector, rose the most as eight of the 11 industries in the broader index. Tourmaline Oil gained 7.4 percent to the highest in 18 months after purchasing $1 billion in Western Canadian energy assets from Royal Dutch Shell Plc. Suncor Energy Inc. gained more than 1 percent.
     Raw-materials rose 0.3 percent, led by Turquoise Hill Resources Ltd. The company said it expects to meet the “higher end” of its full-year target.
     Industrial stocks declined 0.1 percent to the lowest level in more than two weeks, led down by Bombardier Inc. after it announced plans to cut 7,500 jobs, more than 10 percent of its workforce, in the next two years. The airplane manufacturer is initiating a restructuring plan after taking on billions of dollars of debt to develop its marquee C Series jetliner. Bombardier Inc. shares declined 1.1 percent, and have plunged 55 percent since 2011.
     Canada’s inflation rate quickened in September for the first time in five months. The consumer price index rose 1.3 percent in September from a year ago, led by higher gasoline prices. The Bank of Canada maintained the benchmark interest rate at 0.5 percent this week and reduced Canada’s growth profile in large part because of slower housing markets and a lower trajectory for exports.
     Canadian stock valuations remain 17 percent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.6 compared with 20.1 for the the S&P 500 Index, according to data compiled by Bloomberg.

US
By Anna-Louise Jackson
     (Bloomberg) — U.S. stocks closed little changed after erasing an early selloff, as deal activity boosted consumer stocks and Microsoft Corp. rallied to a record, offsetting losses spurred by concerns a stronger dollar will damp corporate earnings.
     Equities rebounded as Reynolds American Inc. soared the most ever after British American Tobacco Plc offered to pay $47 billion for full control of the cigarette maker. Time Warner Inc. jumped to a 15-month high on speculation it may agree to a takeover by AT&T Inc. That blunted declines spurred by the surging dollar and disappointing outlooks from General Electric Co. and Advanced Micro Devices Inc. AT&T sank 3 percent to a seven-month low.
     The S&P 500 Index fell less than a point to 2,141.16 at 4 p.m. in New York, all but wiping out an early 0.5 percent drop. The benchmark capped its first weekly advance in three, increasing 0.4 percent. The Dow Jones Industrial Average lost 16.64 points, or 0.1 percent, to 18,145.71. The Nasdaq Composite Index rose 0.3 percent, buoyed by Microsoft and PayPal Holdings Inc., which jumped 10 percent. About 6 billion shares traded hands on U.S. exchanges, 8 percent below three-month average.
     “This is going to be an earnings reporting season that is going to be moving us back toward positive earnings growth,” Bill Northey, chief investment officer at US Bank’s Private Client Reserve in Helena, Montana, said by phone. “But against that backdrop, we’ve seen a pretty strong jump in the dollar. We’ll have to keep an eye on how strong the U.S. dollar becomes and how U.S. equity markets perform.”
     After surging as much as 7.2 percent this year through a record in August, the S&P 500 has failed to push higher as investors assess central-bank policy, the strength of corporate America and economic reports. The index hasn’t climbed for three consecutive sessions in a month, vacillating between daily gains and losses while trading at 18 times forecast earnings, the highest since 2009. The CBOE Volatility Index fell for a fourth session, the longest streak in three months.
     Earnings remained in focus today, as nine S&P 500 firms reported. More than a fifth of the gauge’s companies have released results so far, and while 81 percent have beaten earnings expectations, analysts still forecast a 0.4 percent contraction in overall third-quarter profits. That compares to a 1.6 percent decline predicted just before the reporting period began two weeks ago.
     “Earnings this season have been all over the place, a mixed-to-OK season,” said Otto Waser, chief investment officer of R&A Group Research & Asset Management in Zurich. “People are generally more cautious when rates rise. Underlying earnings growth is close to zero, so why should the market move higher with interest rates going higher?”
     Among shares moving on earnings news: GE slipped 0.3 percent, after falling as much as 2.6 percent. The company cut its 2016 forecast for organic sales growth, projecting the figure would be flat to up 2 percent this year, after previously forecasting an increase of as much as 4 percent. Advanced Micro Devices fell 6.3 percent after predicting fourth-quarter revenue that will miss analysts’ estimates, hurt by dwindling orders for game console processors.
     Microsoft reached a record, rising 4.2 percent as its results were bolstered by growing demand for cloud-based software and services. 
     PayPal climbed to an all-time high after saying it will make more money in coming years than previously expected, easing concern that recent deals with credit card companies would suppress earnings.
     McDonald’s Corp. marked its strongest gain in a year as quarterly revenue topped estimates, helped by international markets including the U.K. and Canada.
     The dollar is also in the spotlight. The greenback gained versus most peers and for a fourth consecutive day against the euro. It is the strongest since March relative to the single currency after European Central Bank President Mario Draghi signaled that quantitative easing won’t come to an “abrupt” end, leaving traders waiting until at least December for news about policy changes. GE said foreign exchange effects will hurt earnings by as much as 6 cents a share this year.
     “If you have to translate foreign earnings into stronger currency your earnings expectations are going lower,” said Waser. “This caps earnings upside quite a bit.”
     Investors are also parsing economic data and comments by policy makers for hints on the timing of the Federal Reserve’s next interest-rate increase. Reports on manufacturing, consumer confidence, durable goods orders and gross domestic product will be in focus next week.
     Traders are pricing in less than one-in-five odds of a hike at the Fed’s next meeting, which takes place days before the presidential election, and a 69 percent chance of action in December. San Francisco Fed President John Williams said in a speech today that slow growth is likely “here to stay,” and he repeated his support for a gradual increase in rates “sooner rather that later.”
     In Friday’s trading, seven of the S&P 500’s 11 main industries fell. Phone companies led losses for a second day, their worst back-to-back performance in two months. Energy and health-care companies sank more than 0.6 percent. Time Warner helped drive the consumer-discretionary group higher, while Reynolds American and rival cigarette makers Altria Group Inc. and Philip Morris International Inc. lifted consumer staples.
     Scripps Networks Interactive Inc. and Discovery Communications Inc. rallied more than 3.6 percent as cable networks rose on the Time Warner deal speculation. Viacom Inc. and CBS Corp. added at least 2 percent, while Netflix Inc. advanced 3.4 percent to a 10-month high.

Have a wonderful weekend everyone.

Be magnificent!

Do we still not know that the appearance of a seed is in direct contradiction to its true nature?
If you submit the seed to a  chemical analysis, you would find in it perhaps some carbon, proteins,
and many other things, but never the hint of the leaf of a tree.
Rabindranath Tagore

As ever,
 

Carolann

You’ve got to do your own growing,
no matter how tall your grandfather was..
                                  -Irish Proverb

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

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