August 13, 2024 Newsletter

Dear Friends,

Tangents:

August 13, 1521: Spanish conquistador Hernán Cortés captured Tenochtitlán, ending the Aztec empire and winning Mexico for Spain.

On Aug. 13, 1961, Berlin was divided as East Germany sealed off the border between the city’s eastern and western sectors in order to halt the flight of refugees. Go to article >>

Today in History: In 1792, French revolutionaries arrested and imprisoned King Louis XVI

Alfred Hitchcock, b. 1899.

Fidel Castro, b. 1926.

Olympic photography: AP photographers share their favorite Olympic photos

California quake: Earthquake felt from LA to San Diego, swaying buildings and knocking items off shelves

Data shows evidence of a water reservoir on Mars
Data collected from a retired NASA mission suggests there may be enough water beneath the surface of Mars to cover the red planet.

Tour de France Femmes is underway
This year’s edition features the world’s top riders, many of whom just competed in the women’s road race at the Paris Olympics. Gosh, they must be tire-d.

‘This could be the origin of the Atlantis legend’: Mountain that sank beneath the waves discovered off Canary Islands

A large seamount with three inactive volcanoes that sank into the ocean millions of years ago off the coast of Lanzarote may have inspired the legend of Atlantis. Read More.

Buddhas of Bamiyan: The colossal twin statues that stood sentinel over Afghanistan — until the Taliban destroyed them

The twin Buddha statues stood sentinel over a valley in Afghanistan until being destroyed by the Taliban. Now all that’s left are two cavities. Read More.

Enormous hidden ocean discovered under Mars could contain life

Scientists examining data from NASA’s InSight Lander have revealed the likely presence of an underground reservoir containing enough liquid to cover the planet with a mile of water. Read More.

‘Severe’ G4 geomagnetic storm strikes Earth, making widespread auroras likely

Earth was hit by a “severe” G4-class geomagnetic storm on Monday morning, increasing the chances of auroras in the northern U.S. tonight. Read More.

PHOTOS OF THE DAY

A humpback whale pictured during a scientific expedition off the coast of Niteroi, Rio de Janeiro state, Brazil

Photograph: Pablo Porciúncula/AFP/Getty Images

Gaborone, Botswana

Dancers wait at the airport to greet Botswana’s Olympic gold medallist Letsile Tebogo, who won the men’s 200 metres athletics event at the Paris Games

Photograph: Marco Longari/AFP/Getty Images

Jakarta, Indonesia

Market traders prepare national flags and decorations for the country’s independence anniversary

Photograph: Tatan Syuflana/AP

Market Closes for August 13^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:

📈 On this day in 1979, BusinessWeek’s cover proclaimed THE DEATH OF EQUITIES: “Only the elderly, who have not understood the changes in the nation’s financial markets, or who are unable to adjust to them, are sticking with stocks.”

Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite rose for the fourth day, climbing 1%, or 219.25 to 22,618.18 in Toronto. The index advanced to the highest closing level since Aug. 1.
Today, financials stocks led the market higher, as 10 of 11 sectors gained; 169 of 226 shares rose, while 54 fell.
Constellation Software Inc/Canada contributed the most to the index gain, increasing 3.5%. SSR Mining Inc. had the largest increase, rising 7.7%.
Insights
* In the past year, the index had a similar or greater gain 20 times. The next day, it advanced 13 times for an average 0.7% and declined seven times for an average 0.7%
* The index advanced 11% in the past 52 weeks. The MSCI AC Americas Index gained 21% in the same period
* The S&P/TSX Composite is 2.5% below its 52-week high on July 31, 2024 and 21% above its low on Oct. 27, 2023
* The S&P/TSX Composite is up 2.9% in the past 5 days and was little changed in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 18.2 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$3.56t
* 30-day price volatility rose to 14.85% compared with 14.62% in the previous session and the average of 12.00% over the past month
================================================================
|Index Points | | Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | 90.2269| 1.3| 25/2
Information Technology | 43.8213| 2.4| 9/1
Materials | 20.4420| 0.7| 40/12
Consumer Staples | 19.6224| 2.0| 11/0
Energy | 15.9878| 0.4| 23/17
Industrials | 13.5514| 0.5| 19/8
Consumer Discretionary | 11.4519| 1.5| 11/2
Utilities | 6.1722| 0.7| 12/3
Real Estate | 3.5446| 0.7| 13/6
Health Care | 0.5393| 0.8| 3/1
Communication Services | -6.0916| -0.8| 3/2
================================================================
| | |Volume VS | YTD | Index | | 20D AVG | Change Top Contributors |Points Move| % Change | (%) | (%)
================================================================
Constellation Software | 19.0300| 3.5| -5.5| 24.7
Brookfield Corp | 17.0700| 2.8| -0.9| 17.4
Shopify | 16.3900| 2.1| -39.1| -7.1
Ivanhoe Mines | -1.2930| -2.0| -17.1| 19.5
Telus | -3.4040| -1.5| 106.7| -5.8
BCE | -3.6330| -1.2| 11.1| -9.4

US

By Rita Nazareth
(Bloomberg) — Stocks rallied and bond yields fell after the latest US inflation reading reinforced speculation the Federal Reserve will be able to deploy its widely anticipated interest-rate cut in September.
Just 24 hours ahead of the consumer inflation report, data showed the producer price index rose less than forecast.
Categories in the PPI report used to calculate the Fed’s preferred inflation measure — the personal consumption expenditures price index — were generally tame. The S&P 500 climbed 1.7%, led by gains in the world’s largest technology companies. Treasuries rose across the curve, with the move driven by shorter maturities. The dollar fell.
“Markets searching for stability got more evidence of cooling inflation,” said Chris Larkin at E*TRADE from Morgan Stanley. “The lower-than-expected reading will probably be welcomed by a stock market attempting to bounce from its biggest
pullback of the year.”
The easing of price pressures has bolstered confidence US officials can start lowering borrowing costs while refocusing on the labor market, which is showing greater signs of slowing. Fed Bank of Atlanta President Raphael Bostic said he’s looking for
“a little more data” before supporting a reduction in rates, while reiterating he’ll likely be ready to cut “by the end of the year.”
To Ian Lyngen at BMO Capital Markets, there isn’t anything in Tuesday’s data suggesting the Fed will have any hesitation cutting rates next month.
“That said, tomorrow’s consumer inflation update is far more relevant to near-term policy expectations,” he noted.
A survey conducted by 22V Research showed 52% of investors expect the reaction to Wednesday’s consumer price index to be “risk-on.” However, the percentage of respondents expecting a “recession” has stayed elevated.
The S&P 500 saw its biggest four-day rally this year. The Nasdaq 100 climbed 2.5%. The Russell 2000 of smaller firms rose 1.6%. Nvidia Corp. led gains in mega caps. Starbucks Corp. surged by a record 25% after ousting its chief and picking Chipotle
Mexican Grill Inc.’s Brian Niccol as its next leader. Wall Street’s favorite volatility gauge — the VIX — tumbled to around 18. 
Treasury 10-year yields fell six basis points to 3.85%.
Swap traders priced in a nearly 40 basis-point Fed cut in September and a total rate reduction of roughly 105 basis points for 2024. Oil halted a five-day surge.
“Disinflationary data is being celebrated by investors — not for its signaling of a slowing economy here in the US — but to solidify improving liquidity conditions ahead via the much anticipated rate cuts starting presumably in September,” according to Dan Wantrobski at Janney Montgomery Scott.
Interestingly enough, the disinflationary data that triggered the “great rotation” last month is not having the same effect after the latest PPI. Big tech is outperforming small caps on Tuesday as evidenced by the exchange-traded funds tracking the Nasdaq 100 (QQQ) and the Russell 2000 (IWN).
While conditions remain “oversold enough” to capitalize on a favorable CPI print on Wednesday, Wantrobski says he hasn’t seen any signals that negate or cancel the “correction cycle” which began in earnest around Aug. 1.  “Continue to expect a very bumpy ride over the short run, in our opinion,” he concluded.
The volatility in global financial markets hasn’t derailed investor optimism around US technology behemoths or expectations of a soft economic landing, according to a global survey by Bank of America Corp.
While the poll, conducted from Aug. 2 to Aug. 8 and covering the height of last week’s turmoil, showed a defensive rotation into bonds and cash and out of equities, long bets on the “Magnificent Seven” mega caps remained the most crowded trade
— albeit less so after the selloff.  
“Core optimism on soft landing and US large cap growth stocks is unbowed,” strategist Michael Hartnett wrote. It’s “just that investors now think the Fed needs to cut harder to guarantee no recession.”
Tech stocks had been at the forefront of the recent rout in global financial markets amid worries about high valuations at a time when the US economy has shown some signs of cooling. 
At Citigroup Inc., Chris Montagu said US technology stocks remain under “significant pressure” as investor positioning continues extended on the bullish side despite the past month’s selloff.
“On any negative economic data, there will be significant pressure on these long positions,” Montagu wrote. “That, in turn, could amplify any down moves from here in the near term.”
BofA clients were net buyers of US equities for the first time in more than a month last week, snapping up shares during the rout and subsequent recovery. Institutional investors led net purchases of $5.8 billion in US stocks as hedge funds and
retail investors offloaded shares, Jill Carey Hall said.
At a sector level, technology and communications services recorded the largest inflows for the week and on cumulative year-to-date basis, she said.
“Our client flows have tended to weaken in the fall months,” Carey Hall noted, adding she expects continued equity volatility heading into the US election.
Chances of a full-fledged stock market rout are low, even though poor seasonality and a murky growth outlook are likely to limit US equity gains through the rest of the quarter, according to Morgan Stanley’s Mike Wilson.
“I find it hard to believe we’re going to break out back toward the highs,” he said Tuesday in an interview with Bloomberg Television. “I also don’t think we’re going to completely break down in a way that would argue that we’re entering a new bear market.”
“While stocks seem to have stabilized, I do believe there is nervousness in the air, which is likely to lead to higher volatility and the potential for outsized reactions to data and developments,” said Kristina Hooper at Invesco.
To Chris Zaccarelli at Independent Advisor Alliance, this is a “pivotal week” for data following on the heels of the “mini-panic” in the beginning of August.
“If tomorrow’s CPI report comes in lower than expected, like this morning’s PPI report did, then the Fed truly has a green light to cut rates by 50 basis points at their next meeting if they deem it necessary to quickly get back to neutral in the face of a looming slowdown in the economy, he noted.
In the wake the market maelstrom that briefly sparked fear across Wall Street last week, financial markets are flashing a higher probability of an oncoming recession.
It still remains an outside chance. But models from Goldman Sachs Group Inc. and JPMorgan Chase & Co. show that the market- implied odds of an economic downturn has risen materially, judging by signals in the US bond market and to a lesser extent the performance of stocks that are acutely sensitive to the ebbs and flows of the business cycle.
The producer price index for final demand increased 0.1% from a month earlier. The median forecast in a Bloomberg survey of economists called for a 0.2% gain. Compared with a year ago, the PPI rose 2.2%. Excluding the volatile food and energy
categories, it was unchanged in July from the prior month — the tamest reading in four months.
“The runway is clear for the Fed to cut rates in September,” said Jamie Cox at Harris Financial Group. “If data like this persists, the Fed will have plenty of room to cut rates further this year.”
At Evercore, Krishna Guha said there’s “nothing threatening” in the latest PPI data.
“The larger point here is that we are past the point at which a few basis points here or there on month-over-month inflation will have any material bearing on Fed policy and the rate outlook, which at this juncture will be driven overwhelmingly by the labor market data,” Guha said.
David Russell at TradeStation says PPI data gave gives further evidence that the tide has turned on inflation, especially in services. 
“This process could continue or accelerate in coming months as weakness in China weighs on commodity prices. Jerome Powell has a lot to feel good about going into Jackson Hole,” he said.
The Fed Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, Wyoming will be held Aug. 22-24.
Corporate Highlights:
* Home Depot Inc. lowered its forecast of a key sales metric for the year on expectations that consumers will continue to hold back spending in the coming months.
* Boeing Co.’s commercial aircraft deliveries are showing signs of stabilizing, with deliveries in July mirroring those in the same month a year earlier.
* Paramount Global began laying off staff Tuesday after the entertainment company said last week it planned to slash 15% of its US-based workforce, amounting to roughly 2,000 positions.
* General Motors Co. has been laying off staff in China and will soon meet with local partner SAIC to plan a larger structural overhaul of its operations there, a recognition the Detroit automaker is unlikely to see its sales return to 2017 peak levels.
* Baxter International Inc. said it will sell its kidney-care unit to the Carlyle Group private equity firm for $3.8 billion, part of the health care company’s efforts to streamline and pay down debt.
* Avon Products Inc., owner of the beauty brand known for its door-to-door saleswomen, filed for bankruptcy after facing a wave of lawsuits alleging talc in its products caused cancer.
* Illumina Inc.’s plan to increase sales through easier DNA sequencing and improved data analysis failed to excite investors, with targets short of earlier growth rates.
* Kroger Co. and Albertsons Cos. have spent more than $800 million on fees to lawyers, bankers and advisers for their proposed merger, underscoring the high costs of trying to complete the largest ever tie-up between two US grocery chains.

Key events this week:
* Eurozone GDP, industrial production, Wednesday
* US CPI, Wednesday
* China home prices, retail sales, industrial production, Thursday
* US initial jobless claims, retail sales, industrial production, Thursday
* Fed’s Alberto Musalem and Patrick Harker speak, Thursday
* US housing starts, University of Michigan consumer sentiment, Friday
* Fed’s Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks
* The S&P 500 rose 1.7% as of 4 p.m. New York time
* The Nasdaq 100 rose 2.5%
* The Dow Jones Industrial Average rose 1%
* The MSCI World Index rose 1.7%
* Bloomberg Magnificent 7 Total Return Index rose 3.1%
* The Russell 2000 Index rose 1.6%
Currencies
* The Bloomberg Dollar Spot Index fell 0.4%
* The euro rose 0.6% to $1.0996
* The British pound rose 0.8% to $1.2866
* The Japanese yen rose 0.2% to 146.85 per dollar
Cryptocurrencies
* Bitcoin rose 3.4% to $60,850.63
* Ether rose 1.2% to $2,712.82
Bonds
* The yield on 10-year Treasuries declined six basis points to 3.85%
* Germany’s 10-year yield declined four basis points to 2.19%
* Britain’s 10-year yield declined three basis points to 3.89%
Commodities
* West Texas Intermediate crude fell 1.9% to $78.51 a barrel
* Spot gold fell 0.2% to $2,467.08 an ounce
This story was produced with the assistance of Bloomberg Automation.

Have a lovely evening.

Be magnificent!

As ever,

Carolann

At times our own light goes out and is rekindled by a spark from another person.

Each of us has cause to think with deep gratitude of those who have lighted the flame within us. –Albert Schweitzer, 1875-1965.

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