April 20, 2016 Newsletter

Dear Friends,

Tangents:

POEM: Aristotle wrote in “The Poetics” that poets have “an eye for resemblances.”  At first, the matter-of-fact statement of likeness in this poem made me laugh.  Then it made me think:  What if we all walked through the world with such an eye, looking at the inanimate objects that surround us?  What might we see that we relate to, and resemble? –Matthew Zapruder, NY Times, April 19, 2016.

The Pier Leaps Out

 By Monica Fambrough

The pier leaps out
toward the ocean
with its skinny boards stretching
dangerous little gaps
to reveal beneath the gangway
some blackening sea lions,
and I think,
I can relate to that pier.

Matthew Zapruder is the author of four collections of poetry, most recently “Sun Bear.”  He teaches at Saint Mary’s College of California and is editor at large at Wave Books.  Monica Fambrough is a poet whose debut collection, “Softcover,” was published last fall by Natural History Press.

PHOTOS OF THE DAY

Terry Hutt, a royal fan stands in front of the castle in Windsor, England, Wednesday. Royal fans are gathering in Windsor ahead of Thursday’s celebrations for the 90th birthday of Britain’s Queen Elizabeth II. Kirsty Wigglesworth/AP

President Barack Obama and Saudi Arabia’s King Salman walk to President Obama’s motorcade after meeting at Erga Palace in Riyadh, Saudi Arabia, Wednesday. The president began a six day trip to talk, on a broad range of issues, including efforts to rein in the Islamic State group. Carolyn Kaster/AP

Market Closes for April 20^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose a third day, trading at a five-month high, as the nation’s lenders advanced and energy producers reversed losses after oil rebounded on U.S. data showing output fell, while silver producers extended gains.

     The benchmark Standard & Poor’s/TSX Composite Index equity gauge added 0.3 percent to 13,911.29 at 4 p.m. in Toronto, the highest level since October. The benchmark gauge is one of the best-performing developed markets in the world this year with a 6.9 percent gain.

     Bank of Nova Scotia and Toronto-Dominion Bank climbed at least 0.9 percent as financial services stocks increased 0.7 percent, contributing the most to gains in the S&P/TSX. Seven of 10 industries in the index advanced on trading volume about 26 percent higher than the 30-day average.

     Raw-materials producers declined 0.9 percent as declines among gold producers offset extended gains among silver and base metals mining companies. Silver advanced to a May high a day after entering a bull market, extending gains this month to 11 percent. Precious metals have been popular this year, with gains in both gold and silver exceeding 18 percent. Silver is up 24 percent since Dec. 14, meeting the common definition of a bull market.

     Cenovus Energy Inc. and PrairieSky Royalty Ltd. rallied at least 3.3 percent to lead energy producers to a 0.3 percent advance. Crude in New York rose 3.8 percent, climbing to the highest level in almost five months. Oil output fell to 8.95 million barrels a day in the week ended April 15, the lowest since October 2014, while rig counts also slipped to a November 2009 low last week. OPEC members and other producers plan to meet in Russia, possibly in May, to again discuss a potential production cap, Iraq’s Deputy Oil Minister said.

     The resource-dominant S&P/TSX remains closely linked to moves in commodities prices, as a rebound in producers has fueled a 17 percent recovery for the S&P/TSX from a low on Jan. 20. The Canadian benchmark now trades at 22.1 times earnings, about 15 percent higher than the 19.2 times earnings valuation of the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

     Canadian Pacific Railway Ltd. lost 0.7 percent, after falling as much as 3.7 percent. The railroad operator reported first-quarter revenue slipped 4 percent to C$1.59 billion from year-ago levels. While Canadian Pacific posted profit ahead of consensus estimates while also boosting its dividend, investors were perhaps looking for a larger buyback than the company unveiled, BMO Capital Markets analyst Fadi Chamoun said in a note. Canadian Pacific will buy back as much as C$1.31 billion in stock.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks edged higher as an oil rally lifted energy producers, with the Standard & Poor’s 500 Index holding at a four-month high amid a slate of corporate earnings that gave investors little clear direction.

     An afternoon rally stumbled in the final hour of trading to leave equities little changed, wiping out much of the gains sparked by a rebound in crude. Oil jumped after Iraq’s oil minister said major OPEC and other oil producers will meet possibly next month in a new push to freeze output. Meanwhile, a better-than-forecast profit from Discover Financial Services helped offset underwhelming results at Coca-Cola Co.

     The S&P 500 gained 0.1 percent to 2,102.40 at 4 p.m. in New York, after rising as much as 0.5 percent and briefly touching the highest level since July. The Dow Jones Industrial Average added 42.67 points, or 0.2 percent, to 18,096.27, trimming a 114-point climb. The gauge held at a nine-month high. The Nasdaq Composite Index increased 0.2 percent. About 7.5 billion shares traded hands on U.S. exchanges, 7.4 percent below the three- month average.

     “There’s been no bearish catalyst that’s surfaced to really knock things down and earnings are spilling in and going as expected,” said Nick Kalivas, senior equity product strategist at Invesco PowerShares in Downers Grove, Illinois, which has about $100 billion in its funds. “We’re now a couple of heartbeats off the all-time high and that’s creating performance anxiety among fund managers, causing people to think the picture’s not as glum. It’s keeping an underlying bid in the market.”

     Discover shares had the biggest jump since 2011 amid gains in credit-card spending. UnitedHealth Group Inc. rose more than 2.1 percent for a second day after its plans to exit Obamacare in 16 states to curb losses. Coke fell the most since August with earnings mostly in line with expectations, disappointing investors expecting a stronger turnaround for the beverage maker. Boeing Co. sank 1.6 percent after Bank of America Corp. downgraded the stock.

     The S&P 500 has rallied 15 percent since reaching a 22- month low in February and is up 2.9 percent for the year, bolstered by a recovery in oil prices, signs of stabilization in China’s slowdown and optimism central bankers will continue efforts to support growth. The gauge is also 1.3 percent away from a record reached last May.

     Still, the gains in equities have come as earnings are forecast to slide at the steepest pace since the financial crisis. Analysts project first-quarter profits shrank 9.5 percent at S&P 500 firms, compared with estimates for flat earnings growth at the start of the year. Microsoft Corp., General Motors Co. and Google parent Alphabet Inc. are among 36 companies in the index scheduled to report on Thursday.

     As policy makers and investors scrutinize data to judge the strength of the U.S. economy and the outlook for interest rates, a report this morning showed purchases of previously owned homes rose more than projected in March, indicating resilience in demand heading into the spring selling season. Traders are pricing in no chance the Federal Reserve will raise rates at its meeting next week, with December now the first month with at least even odds for a boost.

     In Wednesday’s trading, the Chicago Board Options Exchange Volatility Index rose 0.3 percent to 13.28, snapping its longest streak of declines in almost two months. The measure of market turbulence known as the VIX is holding near the lowest level since August. A Goldman Sachs gauge of the most shorted stocks had the biggest climb in a week amid its longest stretch of gains since March 7.

     Energy producers in the S&P 500 pushed a three-day advance to 4.3 percent as crude rallied for a second day. The group shook off a morning drop as Chevron Corp. increased 1.2 percent, while Schlumberger Ltd. and Devon Energy Corp. gained more than 1.8 percent. West Texas Intermediate crude futures rose 3.8 percent, wiping out a 3 percent retreat to close above $42 a barrel.

     Discover Financial surged 8.2 percent to a four-month high to lead the benchmark’s financial group. Competitor American Express Co. added 2.3 percent to a three-month high before its earnings report. Banks in the S&P 500 rose for a third day, trimming 2016 losses to less than 6.5 percent from as much as 23 percent. Bank of America climbed 3.3 percent, rising for the eighth time in nine days and adding 16 percent during that span. The stock is still down about 11 percent this year.

     U.S. Bancorp. gained 2 percent, even as the nation’s largest regional lender said profit dropped 3.1 percent in the first quarter as provisions for bad loans surged 25 percent, driven by a jump in downgrades on energy-related credits.

     Yahoo! Inc. increased 4.2 percent to the highest since July, buoying the technology group, after Chief Executive Officer Marissa Mayer said the company is moving swiftly to consider offers to buy its Web operations. First-quarter revenue also exceeded analysts’ estimates. Intel Corp. climbed 1.3 percent as the semiconductor company plans to cut 12,000 jobs and shift focus to higher-growth areas, such as chips for data center machines and Internet-connected devices.

     Also within chipmakers, Linear Technology Corp. rallied 4 percent after its quarterly sales outpaced estimates, while its outlook for the current quarter also beat some forecasts. Broadcom Ltd. and Texas Instruments Inc. advanced at least 1.1 percent.                          

     Coca-Cola was the strongest drag today on the S&P 500, with consumer staples joining utilities as the biggest losers among the S&P 500’s 10 main industries. Coke slid 4.8 percent to cut its year-to-date gain by more than half. The shares had reached an all-time high two weeks ago. Hershey Co. lost 3.1 percent after Bank of America downgraded the shares to the equivalent of sell, citing in part sluggish U.S. chocolate sales. Procter & Gamble Co. slid 2.1 percent, the steepest drop since Feb. 11.

     Utilities tumbled 2.4 percent to a one-month low, relinquishing the mantle as the S&P 500’s top-performing group this year to phone companies. NextEra Energy Inc. and Dominion Resources Inc. dropped more than 2.1 percent.

     Among other companies moving on corporate news, Lexmark International Inc. added 9.4 percent after the printer maker accepted a $3.6 billion takeover offer from a group headed by China’s Apex Technology.

Have a wonderful evening everyone.

Be magnificent!

Selfishness in man is a beginning.

Rabindranath Tagore

As ever,

Carolann

The evil of the world is made possible by nothing

but the sanction you give it.

                                  -Ayn Rand, 1905-1982

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