April 8th, 2011 Newsletter
Dear Friends,
All that we are is the result of what we have thought.
-Buddha
Today, April 8th, is Buddha’s birthday, Siddhartha, “the enlightened one.”
Cherry trees bloom during the National Cherry Blossom Festival along the Tidal Basin in Washington. (Jonathan Ernst/Reuters)
Market Commentary:
Canada
By Matt Walcoff
April 8 (Bloomberg) — Canadian stocks rose, completing a fourth-straight weekly gain, as metals and oil advanced.
Goldcorp Inc., the world’s second-largest gold producer by market value, climbed 2.4 percent as the metal rose for a fifth day on a falling U.S. dollar. Suncor Energy Inc., Canada’s biggest oil and gas producer, gained 3.2 percent as fires burned in Libya’s Sarir oil field. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, dropped 1.7 percent after the U.S. forecast larger corn stockpiles than most analysts had estimated.
The Standard & Poor’s/TSX Composite Index advanced 100.66 points, or 0.7 percent, to 14,208.43. The index climbed 0.6 percent this week. Crude climbed 2.3 percent to $112.79 a barrel in New York today.
“Oil back above $110 a barrel is obviously going to juice the Canadian market,” said Andrew Pyle, who helps manage C$200 million ($209 million) as an associate portfolio manager for Bank of Nova Scotia in Peterborough, Ontario. “It’s absolutely an energy and materials day.”
The S&P/TSX’s streak of weekly increases is the longest since October. It has risen 3.9 percent during the period, led by metals producers, as the U.S. dollar has dropped to a 16- month low against a basket of world currencies.
The Thomson Reuters/Jefferies CRB Commodity Price Index gained for a seventh day today to a 30-month high. The U.S. dollar declined against all 16 other major currencies as the euro advanced after German exports increased more than economists forecast and the British pound climbed as U.K. producer prices for March surpassed their estimates.
Gold futures increased 1 percent to settle at $1,474.10 an ounce in New York. Goldcorp rose 2.4 percent to a record C$52.15. Eldorado Gold Corp., which mines in China and Turkey, gained 4.9 percent to C$17.29.
Pan American Silver Corp. had the biggest gain in the S&P/TSX, surging 8.4 percent to C$40.85 as the metal touched the highest price since 1980 and the company held an analyst day in Toronto.
Oil and gas producers advanced as crude futures rallied to a 30-month high on the conflict in Libya.
Suncor increased 3.2 percent to C$44.67. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, climbed 1.9 percent to C$47.28. Cenovus Energy Inc., the country’s fifth-biggest energy company, rose 2.5 percent to C$38.46.
Open Range Energy Corp., which produces natural gas in Alberta, soared 24 percent to a 31-month high of C$4.42 after increasing its forecast for cash flow from operations.
Contract driller Stoneham Drilling Trust jumped 33 percent to a four-year high of C$22.69 after agreeing to be bought by Western Energy Services Corp. for cash and shares. The companies valued the deal at C$24 a unit.
Potash Corp. lost 1.7 percent to C$55.60 after the U.S.
Agriculture Department estimated corn stockpiles will total 675 million bushels on Sept. 1. Analysts had forecast supplies of 589 million bushels, according to the average forecast in a Bloomberg survey.
Transportation stocks retreated as fuel prices climbed.
Canadian National Railway Co., the country’s largest railroad, slipped 1.2 percent to C$70.70. Canadian Pacific Railway Ltd. decreased 1.8 percent to a seven-month low of C$60.30. Air Canada, the country’s biggest airline, fell for a sixth day, dropping 3.5 percent to a seven-month low of C$2.20.
US
By Rita Nazareth
April 8 (Bloomberg) — U.S. stocks fell, preventing the third straight weekly gain for the Standard & Poor’s 500 Index, as oil’s rally to a 30-month high drove down transportation shares and investors speculated the federal government may shut for the first time since 1996.
FedEx Corp., which runs the world’s biggest cargo airline, slumped 2.9 percent. United Continental Holdings Inc. tumbled 5.8 percent as the NYSE Arca Airlines Index slid to the lowest level since September. Expedia Inc. surged 13 percent after the world’s biggest online travel agency said it will split in two.
The S&P 500 fell 0.4 percent to 1,328.17 at 4 p.m. in New York, after gaining as much as 0.5 percent. The Dow Jones Industrial Average decreased 29.44 points, or 0.2 percent, to 12,380.05. The U.S. dollar fell 1.2 percent to $1.4472 per euro, helping drive up prices of commodities traded in dollars.
“As oil rises, the synchronized trade is to de-risk,”said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees $110 billion in client assets. “Higher commodities prices raise concern about future inflation and consumption. One should keep a careful eye on companies’ forecasts and on input costs in particular.”
The S&P 500 has risen 5.6 percent in 2011 as government stimulus measures and higher-than-estimated profits boosted investors’ optimism. U.S. stocks fell yesterday, dragging the Dow average down from an almost three-year high, as another earthquake shook Japan and a dispute over the federal budget threatened to shut down the American government.
Equities also fell as Democratic and Republican leaders in Congress remained divided over a federal budget, hours away from the first U.S. government shutdown in more than 15 years.
Democratic leaders say Republicans are refusing to accept federal funding for Planned Parenthood. Republicans say the dividing issue is the amount of spending cuts.
Commodities rose for a seventh day. Gold and tin climbed to records. The S&P GSCI Spot Index of 24 raw materials reached the highest level since August 2008.
Oil rose above $112 a barrel in New York for the first time since September 2008 and surpassed $126 a barrel in London as a fire burned at Libya’s Sarir field, bolstering concern that unrest in the region will further reduce supply.
“We’re not in a bubble,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which manages $358.2 billion. “You’ve got multiple drivers that are resulting in this commodities rally. There’s a weaker dollar versus the euro in response to European monetary policy. There’s also inflation concern. The third and most important one is the improvement of global economic growth, which is resulting in more demand. That’s positive for stocks.”
The dollar dropped against most of its major counterparts on speculation the Federal Reserve will trail other central banks in raising interest rates and as signs of global growth damped demand for haven assets.
Fed Bank of Dallas President Richard Fisher said the central bank faces a “significant” risk of providing record stimulus for too long and should weigh curtailing its $600 billion bond-purchase plan.
“We at the Fed are near a tipping point,” the 62-year-old regional bank chief said in the text of a speech today in Dallas. “Just as we pressed on in doing our duty through extraordinary, exigent measures, we must now discipline ourselves to just as persistently normalize our operations in a timely way.”
Billionaire investor George Soros said the European Central Bank’s decision to raise its benchmark lending rate was “quite inappropriate” because several euro member countries are suffering from too much debt.
“It is not appropriate in current circumstances when you have a number of countries that are suffering from too much debt and high interest rates,” Soros said today in an interview with Bloomberg Television’s Michael McKee and Sara Eisen at the Bretton Woods conference in New Hampshire.
European Central Bank President Jean-Claude Trichet raised the benchmark interest rate to 1.25 percent yesterday from a record low of 1 percent, where it had been since May 2009.
Policy makers will bring the rate to 1.5 percent in July and 1.75 percent in October, according to the median of 20 estimates in a Bloomberg News survey.
The Dow Jones Transportation Average slumped 1.7 percent as 19 of 20 stocks retreated. The NYSE Arca Airline Index of 15 stocks slumped 2.7 percent.
FedEx lost 2.9 percent to $91.16. United Continental tumbled 5.8 percent to $19.79, dropping for a seventh straight day in the longest losing streak since June.
Expedia surged 13 percent to $25.30. The company will split into two businesses, letting investors own shares of TripAdvisor, which includes 19 travel and advertising businesses. The move will let the shareholders benefit from TripAdvisor’s growth while Expedia pumps money into marketing and hiring to fend off competition from Priceline.com Inc. that has curbed earnings, said Fred Moran, a Benchmark Co. analyst.
Seagate Technologies Plc advanced 7.8 percent to $15.84.
The world’s largest maker of computer disk drives said it will pay its first dividend since 2009.
CVS Caremark Corp. added 2.1 percent to $36.23. The largest U.S. provider of prescription drugs could be worth $25 billion more if the company split itself up, using its rivals’ valuations, according to data compiled by Bloomberg.
Have a wonderful weekend everyone.
Be magnificent!
To know our soul apart from our ego is the first step toward accomplishing the supreme deliverance.
It is necessary that we know with absolute certainty that in essence we are spirit.
And we can only arrive at this knowledge if we render ourselves masters of our ego, if we rise above all pride, all appetite, all fear, by knowing that material losses and the death of the body can never take away the truth and the greatness of our soul.
-Rabindranath Tagore, 1861-1901
As ever,
Carolann
Depend not on fortune, but on conduct.
-Pubililius Syrus, 1rst Century BC
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President & Senior Investment Advisor