October 27, 2016 Newsletter

Dear Friends,

Tangents:
On this day in 1904, the first subway line opens in New York City.

Don’t talk,
Just act.
Don’t say,
Just show.
Don’t promise,
Just prove.

PHOTOS OF THE DAY

Workers pick squash on a snowy autumn morning in Kinderhook, N.Y., on Thursday. Mike Groll/AP

Women take photos in front of a large photo of a MacBook computer in a demo room following the announcement of new products at Apple headquarters on Thursday in Cupertino, Calif. Marcio Jose Sanchez/AP

A cameraman looks at the sculpture ‘Large Head’ during a media preview of the exhibition ‘Alberto Giacometti – Material and Vision,’ by the late Swiss artist, at the Kunsthaus Zürich art museum in Switzerland on Thursday. Arnd Wiegmann/Reuters

Market Closes for October 27^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Number of the Day
$100 billion
The amount that Carlyle said it expects to raise for its funds in the next several years.
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks rose Thursday, snapping a three-day slide as some key companies posted healthy earnings and crude bounced back from the lowest levels in three weeks.
     The S&P/TSX Composite Index rose 0.2 percent to 14,833.75 at 4 p.m. in Toronto. The index had fallen 0.9 percent in the three sessions since closing at a 15-month high on Friday. The equity benchmark is up 14 percent in 2016, the top performance among developed equity markets tracked by Bloomberg.
     Energy producers rallied 1.3 percent to lead gains among five of 11 industries in the S&P/TSX. Crude added 0.9 percent in New York, settling just below $50 a barrel. Reuters reported Saudi Arabia and its Persian Gulf allies are willing to cut 4 percent from their peak oil output. OPEC Secretary-General Mohammed Barkindo urged members to show “maximum flexibility” to agree on output cuts as the group meets later this month.
     Suncor Energy Inc., Canada’s biggest energy producer, climbed 5.7 percent to the highest in two years as the oil-sands giant swung to a profit in the third quarter after restoring operations that were shut during the Alberta wildfires in May. Suncor’s results herald possible improvements in earnings among Canadian energy producers amid the resurgence in petroleum prices this year. Crude has rebounded about 90 percent since February when it fell to its lowest level since 2003.
     Barrick Gold Corp., the world’s biggest bullion miner, added 1.2 percent after beating earnings expectations. Barrick has cut its debt load by $1.4 billion this year and is on track to reach its reduction targets. It also raised its full-year production guidance. Rival Goldcorp Inc. slipped 3.7 percent for its worst slide in three weeks as production fell due to a lengthy work stoppage at one of its mines in Argentina.
     Teck Resources Ltd., Canada’s largest diversified miner, ended the day down 0.6 percent after swinging between gains and losses. The company reported adjusted earnings of 26 cents a share that fell just short of the 28 cents analysts had anticipated as coal production rose less than expected and copper output declined. Teck posted third-quarter net profits of C$234 million ($174.8 million) compared with a loss of C$2.15 billion a year earlier. Teck is the best-performing stock in Canada year-to-date since 2009, with a five-fold increase fueled by rallying metallurgical coal and zinc prices.
     Canadian stocks are now 17 percent more expensive than their peers in the S&P 500 Index. The S&P/TSX trades at 23.4 times earnings, compared with compared with 20 for the S&P 500.

US
By John Hyland and Anna-Louise Jackson
     (Bloomberg) — The looming presidential election and expectations for higher borrowing costs by year end are taking all the joy out of a recovery in corporate profits.
     The best earnings season in six quarters hasn’t been able to shake stocks from a three-month stupor. While companies beat analyst estimates by an average of almost 6 percent in the 15 days since Alcoa Inc. kicked off reporting, the S&P 500 Index has barely budged, notching its smallest move over the comparable period since the first quarter 2015.
     The main benchmark for U.S. equity fell 0.3 percent to 2,133.04 as of 4 p.m. in New York. Losses steepened in afternoon trading, paced by declines in retailers and media companies. The index is down 0.2 percent during the earnings season with less than two weeks until the Federal Reserve’s next meeting and the Nov. 8 presidential election.
     Uncertainty surrounding the political outcome has companies and investors sitting on their hands, said Michael Cuggino, president and portfolio manager of Pacific Heights Asset Management LLC, with $3 billion in assets. “There is this general sense of, ‘Let’s wait until some of those questions are answered a little bit to take on that incremental business project or that business development activity,’ so I think you have that weighing on people, as well. The Fed, again is a wild card.”
     Earnings reports torpedoed small-cap stocks on Thursday, sending the Russell 2000 Index to a more than three-month low. Community Health Systems Inc. plummeted to an all-time low, losing half its value after the struggling hospital chain’s preliminary results missed estimates. GNC Holdings Inc. and Cliffs Natural Resources Inc. slumped more than 18 percent after their results disappointed.
     While the majority of profit reports have been better than expected, investors’ wariness before the election, coupled with lackluster outlooks from companies including Intel Corp., Apple Inc. and 3M Co., have kept equity gains in check this season. The S&P 500 hasn’t climbed for more than two straight days in five weeks, on its way to a third monthly decline and the worst since January. The benchmark trades at 18 times forecast earnings, the highest since 2009.
     The air of caution approaching the November vote isn’t unwarranted. Should Democrats gain control of Congress in a wave election, the results would lower the S&P 500 two percent in the first month, and four percent over three months, according to a report by Goldman Sachs Group. In a non-wave election, the index is poised to gain six percent in the first three months.
     Meanwhile, traders are pricing in less than one-in-five odds of an increase at next week’s meeting, which takes place days before voters decide between Democrat Hillary Clinton and Republican Donald Trump. The probability for a December move is seen at 74 percent.
     “As we approach the election, the apprehension gets even greater and I think that can be alleviated by the polls — the more the polls start to show Hillary’s lead expanding or being more solidified, the more likely the market might be to creep higher,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp. “As the polls show her lead widening, if that happens, then the market could very well ease into and sort of front-run the election and move higher ahead of it.”
     The 261 companies in the S&P 500 that have reported third- quarter results grew profits by an average 2.7 percent over the past year, according to data compiled by Bloomberg. Analysts now expect year-over-year profit will be flat once the June- September reporting is finished, likely bringing an end to the longest earnings recession since the financial crisis.
     In Thursday’s trading, optimism on better-than-forecast profits from companies including Bristol-Myers Squibb Co. and Dow Chemical Co. was tempered by declines in United Parcel Service Inc. and Simon Property Group Inc. after their reports. Utilities and consumer staples slipped as a rout in bonds damped demand for equities with high dividend payouts. About 7.2 billion shares traded hands on U.S. exchanges, 11 percent above the three-month average.
     The Dow Jones Industrial Average lost 29.65 points, or 0.2 percent, to 18,169.68, after wavering between gains and losses as the dollar strengthened while the yield on the 10-year Treasury note jumped on speculation monetary policy will tighten this year. The Nasdaq 100 Index retreated 0.5 percent, weighed by a second day of post-earnings declines in Apple Inc. and Comcast Corp.
     After markets closed, Amazon.com Inc. projected fourth- quarter sales that may miss estimates, sending its shares down 4.4 percent as of 4:34 p.m. in after-hours trading. Google parent Alphabet Inc. edged up 0.5 percent in the late session after its results topped analysts’ forecasts, bolstered by a steady internet ad business.
     “It seems to me that we’re probably in a holding pattern in equities,” said Mark Heppenstall, the Horsham, Pennsylvania- based chief investment officer of Penn Mutual Asset Management, which oversees about $20 billion. “Earnings — some disappointments, some beating expectations, but nothing to get positive momentum.”
     Among shares moving on corporate news today, Qualcomm Inc. rose 2.8 percent to a five-month high after the largest maker of mobile-phone chips agreed to acquire NXP Semiconductors NV in a transaction valued at $47 billion, aiming to speed an expansion into new industries and reduce its dependence on the smartphone market.
     CenturyLink Inc. surged as much as 18 percent, before closing with a 9.7 percent gain as people familiar with the matter said the company is in talks to acquire Level 3 Communications Inc., a deal that would create a more formidable competitor in the market for business telecommunications services.

Have a wonderful evening everyone.

Be magnificent!

We would be happy to do the millions of things that we are not able to do.
The will is there, but we are not able to fulfill our desire.  Thus when we feel a desire, but we are unable to realize that desire, we undergo a reaction we call suffering.
What is the cause of desire?  I am, only me.
As a result, I myself am the cause of all of the suffering that I have known.
Swami Vivekananda

As ever,
 

Carolann

Is man by nature morally good or evil?  Neither, for he is by nature not a moral being;
he only becomes such when his reason is raised to the concepts of duty and law   
                                                                         -Immanuel Kant, 1724-1804

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

Tel: 778.430.5808
(C): 250.881.0801
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www.carolannsteinhoff.com