April 26, 2016 Newsletter

Dear Friends,

Tangents:

1937: Massacre, Guernica, Spain.

1986: The worst nuclear power plant accident in history occurs at the Chernobyl nuclear plant.

QUOTE OF THE DAY

“By 2020, we’ll be able to live without oil.”

Deputy Crown Prince Mohammed bin Salman on Saudi Arabia’s plans, unveiled yesterday, to free the kingdom from its dependence on oil revenues, in part by selling a stake in its state-owned oil company and creating the world’s largest sovereign-wealth fund. 

PHOTOS OF THE DAY

Syrian refugee Ibrahim Al-Hussein (c.), a freestyle swimmer, basketball player and former judo wrestler, receives the Olympic flame Tuesday from the head of Greece’s Olympic Committee, Spyros Capralos, at the Elaionas camp, home to about 1,500 refugees and other migrants, in Athens. The flame arrives in Brazil on May 3 and will be relayed across the vast country by about 12,000 torchbearers before the Aug. 5 opening ceremony in Rio de Janeiro’s Maracana Stadium. Thanassis Stavrakis/AP

Athletes present the official uniforms of Germany’s Olympic and Paralympic teams for the Rio 2016 Summer Olympic Games, in Duesseldorf, Germany, Tuesday. Wolfgang Rattay/Reuters

Market Closes for April 26^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Tweet of the Day

From Dec. 31, 1990 thru April 22, 2016, the S&P 500 posted a 9.9% CAGR, including dividends reinvested, and rose in 21 or 25 years.

— Sam Stovall @StovallSPGlobal

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose for the first time in four days as energy producers advanced with crude oil.

     The benchmark Standard & Poor’s/TSX Composite Index rose 0.1 percent to 13,809.44 at 4 p.m. in Toronto, paring gains in the final hour of trading. The equity gauge managed to snap the longest losing streak in three weeks after fluctuating in morning trading. The gauge is one of the best-performing developed markets in the world this year with a 6.2 percent gain.

     Teck Resources Ltd. added 4.8 percent after reporting a surprise first-quarter adjusted profit to lead raw-materials producers higher as five of 10 industries increased. Industrial stocks sank 2.2 percent to offset some gains, led by a 1 percent decline in Canadian National Railway Co.

     Canadian National slid to the lowest since March 3 after the country’s largest railroad operator cut its full-year profit target for the first time in eight years amid weaker-than- expected demand for commodities including coal and crude. Adjusted earnings for 2016 will be in line with 2015’s C$4.44 a share, down from earlier forecasts of a mid to single-digit increase for the year, the Montreal-based company said in a statement Monday.

     Encana Corp. and Crescent Point Energy Corp. climbed at least 2.1 percent as energy stocks advanced 0.4 percent. Crude futures gained 3.3 percent in New York, trading above $44 a barrel to a five-month high amid signs that a global surplus is gradually diminishing, even as markets remain oversupplied.

     The resource-dominant S&P/TSX remains closely linked to moves in commodities prices, with a 17 percent rally in the benchmark equity gauge from a Jan. 20 low aligning with a rebound in crude from the lowest levels since 2003. Raw- materials and energy producers are the two top-performing industries in Canada so far this year, up more than 13 percent.

     The Canadian benchmark now trades at 22 times earnings, about 14 percent higher than the 19.2 times earnings valuation of the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

     Bombardier Inc. rallied 8.9 percent, for the highest close since July, after the aircraft manufacturer signed a firm order with Chorus Aviation Inc. valued at $229 million for five aircraft with an option for five more.

     Husky Energy Inc. sank 9.2 percent, the most since October, after the energy company raised C$1.7 billion in relief for some of its Canadian pipelines from Li Ka-Shing, Hong Kong’s richest man, who controls the company. A couple of Li’s other units bought 65 percent of Husky’s midstream operations, which will continue to be run by Husky. The energy producer also posted a C$458 million loss in the first quarter, compared with a profit a year ago.

US

By Anna-Louise Jackson

     (Bloomberg) — The Standard & Poor’s 500 Index edged higher amid mixed corporate earnings results, while crude oil rallied to lift commodity producers and investors awaited tomorrow’s Federal Reserve policy update.

     Equities have had difficulty making further headway after reaching multi-month highs last week, holding in a tight range as the flow of financial results accelerates. Better-than- forecast profits at Procter & Gamble Co. and 3M Co. were greeted with ambivalence today as shares in the two companies retreated more than 1.3 percent. DuPont Co. added 2.4 percent after raising its 2016 earnings outlook. After markets closed, Apple Inc. sank and Twitter Inc. tumbled as their results disappointed.

     The S&P 500 rose 0.2 percent to 2,091.70 at 4 p.m. in New York, the fourth daily move of 0.2 percent or less since closing last Wednesday at the highest since Dec. 1. The Dow Jones Industrial Average added 13.08 points, or 0.1 percent, to 17,990.32. The Russell 2000 Index advanced 1.1 percent to the highest since Dec. 29 as crude boosted energy shares in the gauge. The Nasdaq Composite Index slipped 0.2 percent. About 6.5 billion shares traded hands on U.S. exchanges, 18 percent below the three-month average.

     “The S&P 500 is at what I consider to be a key resistance area in that 2,090 range, so it’s going to take some good news to push through that,” said Alan Gayle, a senior strategist at Atlanta-based RidgeWorth Investments, which has about $37 billion in assets. “The FOMC starts its deliberations now and so it would appear at this critical positioning in the market near resistance that traders may be just waiting on the sidelines until the FOMC is done before making any real bets.”

     A two-month rally has sputtered as a mix of uninspiring corporate results have given investors little incentive to push the S&P 500 higher after it reached a four-month peak. The U.S. benchmark index has rebounded 14 percent since a 22-month low in February, helped by a rise in oil prices and optimism the Fed will remain supportive of growth. The gauge last week briefly climbed within 1 percent of a record set in May.

     As the earnings season picks up pace, analysts are projecting a 9.2 percent decline in first-quarter profit for S&P 500 companies, compared with forecasts for flat growth at the start of the year. More than a third of the companies in the main U.S. equity index report this week. Of those that have released results so far, 80 percent beat profit projections, while 59 percent topped sales forecasts.

     Apple fell 6 percent as of 4:46 p.m. after it posted its first quarterly revenue drop in more than a decade and forecast another decline in the current period, dragged down by waning demand for the iPhone. The company boosted its dividend and stock-buyback program. Twitter tumbled 11 percent after forecasting current-quarter revenue that will fall short of analysts’ estimates, signaling the struggle to add users have dented advertising sales for the social network.

     Among the companies that reported today, Corning Inc. and Whirlpool Corp. sank more than 3.5 percent after their results missed estimates. Ryder System Inc. and truck maker Paccar Inc. gained at least 5.1 percent after exceeding forecasts. Coach Inc. climbed 4.2 percent, the best day since January after topping profit expectations amid signs its turnaround is progressing.

     With policy makers and investors assessing data to judge the strength of the economy, a report today showed orders for U.S. durable goods climbed less than forecast in March as demand for capital equipment remained weak. A separate reading on home prices in 20 U.S. cities rose less than forecast in February from a year earlier. Another gauge showed consumer confidence decreased more than forecast in April.

     While traders are pricing in zero chance of the Fed increasing interest rates tomorrow, investors will be looking for any clues on potential shifts in the trajectory of borrowing costs. September is now the first month with at least even odds for a rate boost.

     “We are looking for some direction in terms of, is this the low for earnings this year, and can we expect an improvement going into year end,” said Daniel Murray, the London-based head of research at EFG Asset Management, which oversees about $12 billion. “Clearly what the Fed says will be important from that perspective.”

     Six of the S&P 500’s 10 main industries advanced Tuesday, with energy and raw-materials shares rising more than 1.1 percent. Technology, health-care, consumer staples and phone companies lost at least 0.3 percent.

     Energy stocks rebounded 1.4 percent to erase a 1.1 percent slide on Monday. West Texas Intermediate crude rose 3.3 percent, above $44 a barrel amid signs that a global surplus is gradually diminishing. Pioneer Natural Resources Co. gained 7.7 percent, the most in two months after the company lifted its 2016 production growth target. ConocoPhillips increased 3.9 percent.

     DuPont’s advance, along with a 2.2 percent gain in merger partner Dow Chemical Co. boosted raw-materials shares back to a nine-month high. Alcoa Inc. jumped 4.9 percent, the most in five weeks, and Newmont Mining Corp. added 2.8 percent after RBC Capital Markets LLC upgraded the shares to the equivalent of buy.

     Hershey Co. and Procter & Gamble declined more than 1.9 percent to lead consumer staples shares lower following their results. Hershey missed quarterly sales estimates and cut its 2016 net sales view. P&G beat forecasts, though its cost cuts helped cushion the blow of tepid sales.

     Drug companies dragged on the health-care group for a second day. Eli Lilly & Co slipped 2.1 percent after its profit missed analysts estimates. The company raised its 2016 earnings forecast after a tax benefit. Biotechnology shares sank, led by Sarepta Therapeutics Inc. which plunged 26 percent after a regulatory panel failed to back the company’s experimental drug to treat a form of muscular dystrophy. The Nasdaq Biotech Index slid 1.5 percent.

     Corning’s biggest drop since July 2014 and a 7.7 percent slide in Flir Systems Inc. weighed on the tech group, which extended the longest losing streak in more than three months. Google parent Alphabet Inc. and Microsoft Corp. both erased yesterday’s bounces, declining at least 1.2 percent. Meanwhile, semiconductors rose, led by Micron Technology Inc.’s steepest climb since January amid optimism on pricing for dynamic random- access memory chips. Qorvo Inc. increased 2.8 percent.

Have a wonderful evening everyone.

Be magnificent!

Do not destroy.  Iconoclastic reformers do no good to the world.

Help, if you can;  if you cannot, fold your hands, stand by and see things go on.

Therefore say not a word against any man’s convictions, so far as they are sincerer.

Secondly, take man where he stands, and from thence give him a lift.

Swami Vivekananda

As ever,

Carolann

I never lose sight of the fact that just being is fun.

                        -Katherine Hepburn, 1907-2003

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