April 10, 2024, Newsletter

Dear Friends,

Tangents:

April 10, 1947:  Brooklyn Dodgers president Branch Rickey announced he had purchased the contract of Jackie Robinson from the Montreal Royals, paving the way for Robinson to become the first black to play in the major leagues. Go to article >>
April 10, 2001: Mercy killings become legal in the Netherlands, legalizing euthanasia for patients with unbearable, terminal illness.

1849: Safety pin patented.
1942: Bataan Death March.

Eclipse from space: See the moon’s shadow race across North America at 1,500 mph in epic satellite footage
Satellite images show the moon’s gigantic shadow sweeping across North America during the April 8 total solar eclipse. Astronauts on board the ISS also captured stunning shots of the enormous dark patch. Read More.

Part of the San Andreas fault may be gearing up for an earthquake
The Parkfield section of the San Andreas fault is sending mixed messages before a time of expected increased seismic risk. Read More.

77,000 baby salmon survive truck crash in Oregon by leaping into nearby creek
A truck that was transporting 102,000 spring Chinook salmon to the Imnaha River in northeastern Oregon crashed in a road bend, spilling most of its cargo into a nearby creek. Read More.

5 desserts for celebrating Eid al-Fitr
Muslims around the world are celebrating Eid al-Fitr, the holiday marking the end of the monthlong Ramadan fast. Here are a few delicious dishes to include in the festivities.

The world’s oldest tattoos
Ötzi the Iceman, whose 5,300-year-old body was found by hikers in the Tyrolean Alps, has 61 tattoos. Scientists now think they understand the technique behind them.

Jay Leno granted conservatorship of wife Mavis Leno’s estate
A judge granted Jay Leno’s request for a conservatorship of his wife’s estate, saying the move is “necessary and appropriate” as she battles dementia.
PHOTOS OF THE DAY

Dorset, UK
An aerial view of a large cliff fall at Hive Beach in Burton Bradstock
Photograph: Finnbarr Webster/Getty Images

Paris, France
Anouk Garnier climbs up a rope under the Eiffel Tower during an attempt to beat a rope climb record
Photograph: Laurent Cipriani/AP

​​​​​​​Lapland, Finland
‘-20C outside, thigh-deep in snow and with the last gasps of a battery in a soon-to-be-frozen camera – I got the shot.’
Photograph: Steven Hyde
Market Closes for April 10^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1792, the New York legislature enacted a law banning public stock auctions, the first known securities law in American history, following a stock-market crash a month earlier.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell 0.7% at 22,199.13 in Toronto.
The move was the biggest since falling 2.3% on Feb. 13 and follows the previous session’s increase of 0.5%.
Today, financials stocks led the market lower, as 10 of 11 sectors lost; 155 of 224 shares fell, while 66 rose.
Shopify Inc. contributed the most to the index decline, decreasing 3.1%.
Brookfield Infrastructure Partners LP had the largest drop, falling 4.4%.
Insights
* The index advanced 9.5% in the past 52 weeks. The MSCI AC Americas Index gained 25% in the same period
* The S&P/TSX Composite is 0.8% below its 52-week high on April 9, 2024 and 18.8% above its low on Oct. 27, 2023
* The S&P/TSX Composite is up 0.4% in the past 5 days and rose 2.1% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 18.5 on a trailing basis and 15.2 times estimated earnings of
its members for the coming year
* The index’s dividend yield is 3% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.54t
* 30-day price volatility rose to 7.64% compared with 7.31% in the previous session and the average of 9.59% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | -105.6657| -1.5| 7/20
Information Technology| -38.0849| -2.0| 1/9
Utilities | -15.0351| -1.8| 1/14
Real Estate | -12.2215| -2.4| 1/20
Consumer Discretionary| -7.1695| -0.9| 2/9
Communication Services| -5.4890| -0.8| 0/5
Materials | -4.6016| -0.2| 14/36
Consumer Staples | -4.4559| -0.5| 2/9
Industrials | -1.6917| -0.1| 6/21
Health Care | -1.5097| -2.2| 0/4
Energy | 33.2709| 0.8| 32/8
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
Shopify | -26.9400| -3.1| 17.6| -4.6
Brookfield Corp | -22.1000| -4.0| 10.6| 0.8
TD Bank | -17.6200| -1.8| 18.5| -8.0
Canadian National | 6.9480| 1.0| 4.0| 7.8
Suncor Energy | 10.5600| 2.2| -36.3| 26.6
Canadian Natural Resources | 12.1500| 1.5| -42.9| 29.7
US
By Rita Nazareth
(Bloomberg) — Wall Street traders sent stocks and bonds sliding after another hot inflation report signaled the Federal Reserve will be in no rush to cut rates this year.
Oil climbed as geopolitical jitters resurfaced.
Equities extended their April losses, with the S&P 500 down about 1% as the consumer price index beat forecasts for a third month.
In a hawkish reprice of the Treasury curve, 10-year yields topped 4.5% and Fed swaps are now showing bets on only two rate cuts for 2024.
A sharp reversal in oil also weighed on sentiment, with Bloomberg News reporting the US and its allies believe major missile or drone strikes by Iran or its proxies on Israel are imminent.
As the Fed rides the “last mile” toward its 2% inflation goal, the concern is that price pressures may not be just a “bump in the road” — with the higher-for-longer rate narrative taking hold.
Minutes of the last Fed meeting showed “almost all” officials judged it would be appropriate to pivot “at some point” this year.
But inflation since then has upended market bets.
“It’s often said that the Fed takes the escalator up and the elevator down when setting rates,” said Richard Flynn at Charles Schwab. “But for the path downwards in this cycle, it looks like they will opt for the stairs.”
The Fed minutes also showed policymakers “generally favored” slowing the pace at which they’re shrinking the asset portfolio by roughly half.
The S&P 500 dropped to around 5,160.
Treasury two-year yields surged 23 basis points to 4.97%.
The dollar saw its biggest advance since January.
A weak $39 billion sale of 10-year bonds also boosted yields.
Brent crude climbed back above $90.
The March core consumer price index, which excludes food and energy costs, increased 0.4% from February, according to government data out Wednesday.
From a year ago, it advanced 3.8%, holding steady from the prior month.
These inflation figures — alongside the jobs report released last week — complicate the timing of the Fed’s rate cuts, according to Tiffany Wilding at Pacific Investment Management Co.
Not only there’s now a strong case to push out the timing of the first reduction past mid-year, it also strengthens the odds that the US will ease policy at a more gradual rate than its developed-market counterparts, she noted.
“Inflation right now is like the ‘stubborn child’ that refuses to heed the parent’s call to leave the playground,” said Jason Pride at Glenmede. “As a result, investors should be prepared for a higher-for-longer monetary regime.”
That doesn’t mean rates are going higher — but the distance to a rate cut is another quarter, according to Jamie Cox at Harris Financial Group.
“You can kiss a June interest-rate cut goodbye,” said Greg McBride at Bankrate. “There is no improvement here, we’re moving in the wrong direction.”
To Neil Dutta at Renaissance Macro Research, Fed officials are still cutting this year — but they won’t be starting in June.
“I think July is probable, which means two cuts remain a reasonable baseline,” Dutta said. “If the Fed does not get a cut off in July, however, investors will need to worry about path dependency. As an example, would September be too close to the election? If not June, then July. If not July, then December.”
At the start of the year, the amount of easing priced in for 2024 exceeded 150 basis points.
That expectation was based on the view that the US economy would slow in response to the Fed’s 11 rate hikes over the past two years.
Rather, growth data has broadly exceeded expectations.
While Fed Chair Jerome Powell has repeatedly stressed that financial conditions are weighing on the economy, many market-based measures suggest otherwise.
Stocks have added $12 trillion in value since October alone, contributing to readings in a gauge of financial conditions tracked by Bloomberg that are looser now than before the Fed began tightening.
“Easy financial conditions continue to provide a significant tailwind to growth and inflation. As a result, the Fed is not done fighting inflation and rates will stay higher for longer,” said Torsten Slok at Apollo Global Management. “We
are sticking to our view that the Fed will not cut rates in 2024.”
Former Treasury Secretary Lawrence Summers went a step further to say that one would have to “take seriously the possibility that the next rate move will be upwards rather than downwards.”
Such a likelihood is somewhere in the 15% to 25% range, he told Bloomberg Television’s Wall Street Week with David Westin.
Despite early evidence of a re-heating economy, the bar for Fed hikes at this stage is quite high, according to Lauren Goodwin at New York Life Investments.
“A signal that interest rates could move higher would likely be met with a rapid tightening in market financial conditions,” she noted. “We believe there is enough evidence of gradually expanding cracks in the economy to keep further
tightening off the table unless inflation accelerates meaningfully.”
Another hot CPI reading may have been “the final nail in the coffin” for a June rate cut, but it remains to be seen whether 2024 will turn out to be a two-cut year, or something less, according to Chris Larkin at E*TRADE from Morgan Stanley.
To Chris Zaccarelli at Independent Advisor Alliance, the Fed still has a bias to cut rates and is likely to do so in either July or September.
Still, if inflation remains sticky, that may be the only rate cut we get this year.
“Goldilocks has left the building,” he added. “Inflation isn’t coming down anymore and rate-cut hopes are going to be pushed off even further into the future.”
Traders and policymakers alike risk reading too much into the hotter-than-expected US inflation print that jolted markets and called into question the central bank’s interest-rate cutting cycle, according to a top macro strategist at Citadel.
“It was never going to be a steady path. We’re seeing bumps, and the bumps are just part of the game,” Angel Ubide at Citadel told Bloomberg Television. “Unless there’s a policy mistake — and I’m not saying that there will be — we should see inflation converging gradually towards 2%,” he said.
As the hot inflation print all but removed the possibility of rate cuts in the near future, that leaves earnings as a last leg of support for the resilient stock market rally that began last year.
“The reaction to the CPI report adds further fuel to the belief that equity markets are in for a period of sluggishness,” said Mark Hackett at Nationwide. “As the focus shifts to earnings season, investors may watch with a different lens, with strong results potentially further adjusting rate cut assumptions, returning us to a ‘good news is bad news’ posture.”
To Jose Torres at Interactive Brokers, risk assets are approaching a fork in the road.
“If the Fed implicitly accepts price pressures between 3% and 4%, the inflation put has been born, providing another stabilizing force on top of the traditional Fed and dividend puts,” Torres said. “But if the central bank remains committed to 2%, hell or high water, then a meaningful equities correction will occur. This correction could be significant, with equity valuations expanding mainly due to expectations that the Fed will make significant rate cuts this year.”
Torres said that would help sustain corporate earnings while reducing the likelihood of the economy entering a recession.
“We find ourselves in an environment where stocks appear fully valued, market interest rates are climbing and the consensus expectation for Federal Reserve rate cuts is dwindling,” said John Lynch at Comerica Wealth Management. “It
is therefore imperative, in our opinion, that corporate profits continue to expand to justify current levels of equity valuation and investor sentiment.”
With banks slated to unofficially kick off first-quarter earnings this week, their results will be watched closely to see whether growth can justify an S&P 500 price-earnings ratio that’s roughly 20% above its 10-year average.
At 21 times profits, that translates to an earnings yield of 4.8%, a multiple that looks increasingly unfavorable with 10-year Treasury yields rising to 4.5%.

Wall Street’s Reaction to CPI Data:
* David Kelly at JPMorgan Asset Management:
That’s the sound of the door slamming shut on a June rate cut.

* Quincy Krosby at LPL Financial:
The Fed’s last mile just got longer and bumpier. The Fed may still be able to cut in June, but the narrative is getting increasingly difficult. 

* Matthew Weller at Forex.com and City Index:
No matter how you slice the data, it’s hard to argue that inflation is falling. For a central bank that was looking for any sign that inflation was continuing to fall toward its target, this report will be a big disappointment for the Federal
Reserve.

* Jeff Schulze at ClearBridge Investments:
This inflation release effectively takes June off the table for the first rate cut and should push the odds out further with a coin toss in July or September.

* John Leiper at Titan Asset Management:
This reinforces our view that the market remains too optimistic on rate cuts this year given the underlying strength of the US economy.

* Charles Hepworth at GAM Investments:
For the June rate cut optimists, this reading is a bit of blow. Markets have been wrestling with the likelihood of the Federal Reserve delivering on three rate cuts this year, but on these numbers, two rate cuts may now be the more likely outcome.

* Neil Birrell at Premier Miton Diversified Funds:
The US economy is running along at quite a pace and a June rate cut looks less and less likely – July or September is the call now. The Fed has got some head scratching to do and if
other central banks were waiting for the Fed to move, they have
got a conundrum on their hands now.
* Lindsay Rosner at Goldman Sachs Asset Management:
The rates market needs to seriously consider the likelihood of higher-for-longer at minimum lasting through the Summer and potentially through the end of the year. This number did not eclipse the Fed’s confidence, it did, however, cast a shadow on it.

* Seema Shah at Principal Asset Management:
This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip. In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient
caution within the Fed now to mean that a July cut may also be a stretch.

Corporate Highlights:
* President Joe Biden reiterated his support for US workers opposed to a Japanese company’s bid to acquire United States Steel Corp., while stopping short of calling again for continued domestic ownership. .
* Meta Platforms Inc. is deploying a new homegrown chip to help power its artificial intelligence services, aiming to decrease its reliance on semiconductors from Nvidia Corp. and other outside companies.
* Delta Air Lines Inc. expects earnings to exceed Wall Street’s projections for the second quarter as the carrier benefits from a step-up in corporate travel and steady leisure demand heading into summer.
* Macy’s Inc. named two new directors nominated by activist investor Arkhouse Management Co., which agreed to end its effort to seek majority board representation as it attempts to acquire the department-store operator.
* Apple Inc. assembled $14 billion of iPhones in India last fiscal year, doubling production in a sign it’s accelerating a push to diversify beyond China.
* Taiwan Semiconductor Manufacturing Co.’s quarterly revenue grew at its fastest pace in more than a year, shoring up expectations that a global boom in AI development is fueling demand for high-end chips and servers.
* UBS Group AG faces a “substantial” increase in regulatory capital requirements under reforms that the Swiss government is advocating for in the wake of the collapse of Credit Suisse.

Key events this week:
* China PPI, CPI, Thursday
* Eurozone ECB rate decision, Thursday
* US initial jobless claims, PPI, Thursday
* New York Fed President John Williams speaks, Thursday
* Boston Fed President Susan Collins speaks, Thursday
* China trade, Friday
* US University of Michigan consumer sentiment, Friday
* Citigroup, JPMorgan and Wells Fargo due to report results, Friday.
* San Francisco Fed President Mary Daly speaks, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 fell 0.9% as of 4 p.m. New York time
* The Nasdaq 100 fell 0.9%
* The Dow Jones Industrial Average fell 1.1%
* The MSCI World index fell 0.9%
Currencies
* The Bloomberg Dollar Spot Index rose 0.8%
* The euro fell 1.1% to $1.0743
* The British pound fell 1.1% to $1.2540
* The Japanese yen fell 0.8% to 152.95 per dollar
Cryptocurrencies
* Bitcoin rose 1.3% to $69,997.81
* Ether rose 0.3% to $3,521.72
Bonds
* The yield on 10-year Treasuries advanced 18 basis points to 4.55%
* Germany’s 10-year yield advanced six basis points to 2.44%
* Britain’s 10-year yield advanced 12 basis points to 4.15%
Commodities
* West Texas Intermediate crude rose 1.3% to $86.31 a barrel
* Spot gold fell 0.9% to $2,331.31 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Liz Capo McCormick, Jessica Menton, Carly Wanna, Natalia Kniazhevich, Denitsa Tsekova, Lu Wang, Ryan Vlastelica, Sagarika Jaisinghani, Alexandra Semenova, Carter Johnson and Felice Maranz.
Have a lovely evening.

Be magnificent!
As ever,

Carolann
Failure is simply the opportunity to begin  again, this time more intelligently. –Henry Ford, 1863-1947.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

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
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com