August 2nd, 2024, Newsletter

Dear Friends,

Tangents: Happy Friday.

August 2, 1870: World’s first underground railway opens for passengers in London.  It goes bankrupt within a few months.
August 2, 1939 Albert Einstein signed a letter to President Franklin D. Roosevelt urging creation of an atomic weapons research program.  Go to article >>
1964: Jackie Robinson joins a CORE demonstration at the NYC construction site of Downstate Medical Center to protest racial discrimination in hiring.

Auroras expected tonight and through the weekend as US braces from ‘cannibal’ solar eruption
The last gasp of a “cannibal” coronal mass ejection that slammed Earth on Tuesday will bring lovely auroras to parts of the northern US and most of Canada tonight, with more northern lights displays on the way this weekend.
Read More.

World’s largest iron ore deposits formed over 1 billion years ago in supercontinent breakup
Huge iron ore deposits in Western Australia’s Hamersley Province formed when major tectonic events led to the breakup of supercontinent Columbia and to the amalgamation of Australia. Read More.

Scientists uncover microbes that destroy ‘forever chemical’ pollutants
Little is known about the fate of PFAS in our environment, but new research finds that bacteria in wastewater can degrade specific types of “forever chemicals.” Read More.

World’s ‘best-performing’ quantum computing chip could be used in machines by 2027, scientists claim
New ion-trap chip eschews lasers for an integrated circuit that can be mass produced in existing semiconductor factories. Read More.

What are the sharp spikes on roses called?
Many say thorns, others say prickles. Let’s settle this debate once and floral. Read about roses’ spiky origins and some common misconceptions about the popular flower.

Judge throws out the $4.7 billion NFL ‘Sunday Ticket’ verdict
The NFL said it was “grateful” after a judge threw out the $4.7 billion jury verdict surrounding its “Sunday Ticket” package.

From Harlem to Selma to Paris: Today would have been James Baldwin’s 100th birthday. See his life in pictures.

PHOTOS OF THE DAY

Argyll and Bute, UK
‘Sun and cloud in the Highlands, near the Bridge of Orchy.’
Photograph: Owen Holland

A grey heron touching down in Koçacay Delta, Turkey. The area is important for natural life with its floodplain forests, lagoons and large sand dunes
Photograph: Anadolu/Getty Images

Paris, France
Italy’s Filippo Macchi competes against Cheung Ka Long of Hong Kong during the men’s foil individual gold medal bout during the Paris Olympic Games 2024 at Grand Palais.
Photograph: Catherine Steenkeste/Getty Images
Market Closes for August 2^nd, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1990, Saddam Hussein invaded Kuwait. Over the next two-and-a-half months, the U.S. stock market lost 19% and many experts forecasted a protracted bear market. Yet, just one year later, U.S. stocks were up 26.9%.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell for the second day, dropping 2.2%, or 495.58 to 22,227.63 in Toronto.
The move was the biggest since falling 2.3% on Feb. 13.
Today, financials stocks led the market lower, as 9 of 11 sectors lost; 191 of 226 shares fell, while 33 rose.
Shopify Inc. contributed the most to the index decline, decreasing 6.5%.
Lightspeed Commerce Inc. had the largest drop, falling 9.4%.
Insights
* In the past year, the index had a similar or greater loss once
* So far this week, the index fell 2.6%, heading for the biggest decline since the week ended Sept. 22
* The index advanced 9.9% in the past 52 weeks. The MSCI AC Americas Index gained 17% in the same period
* The S&P/TSX Composite is 4.2% below its 52-week high on July 31, 2024 and 18.9% above its low on Oct. 27, 2023
* S&P/TSX Composite is trading at a price-to-earnings ratio of 17.8 on a trailing basis and 15.1 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.1% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.61t
* 30-day price volatility rose to 14.01% compared with 12.08% in the previous session and the average of 11.17% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | -165.4381| -2.3| 2/25
Energy | -114.2906| -2.8| 1/40
Information Technology| -84.2520| -4.8| 0/10
Materials | -66.7516| -2.4| 9/42
Industrials | -51.2249| -1.7| 1/27
Consumer Discretionary| -8.7161| -1.1| 2/10
Consumer Staples | -8.3478| -0.8| 1/10
Real Estate | -4.6681| -0.9| 6/14
Health Care | -2.3446| -3.5| 2/2
Utilities | 1.1294| 0.1| 5/10
Communication Services| 9.3447| 1.3| 4/1
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
Shopify | -44.2000| -6.5| 142.0| -26.9
RBC | -33.7100| -2.2| -50.4| 11.2
Canadian Natural Resources | -33.4100| -4.6| -29.2| 6.6
Telus | 3.7140| 1.6| 146.4| -2.3
Fortis | 3.8240| 1.9| 25.6| 8.3
Enbridge | 6.8330| 0.9| 43.3| 10.3
US
By Rita Nazareth
(Bloomberg) — The selloff in stocks intensified and bond yields tumbled as a weak jobs report fueled worries that the Federal Reserve’s decision to hold rates at a two-decade high is risking a deeper economic slowdown.
Those fears roiled trading around the globe, spurring a massive surge in volatility while triggering a flight away from the riskier corners of the market.
The S&P 500 saw its worst two-day slide since March 2023.
A plunge in key technology companies sent the Nasdaq 100 down 10% from its peak, matching the definition of a “correction.”
A rally in Treasuries extended into a seventh straight day, with traders projecting the Fed will cut rates by a full percentage point in 2024.
The rout in equities follows a torrid advance partly driven by bets on a “soft economic landing” that would keep driving Corporate America.
While the Fed has been able to successfully bring down inflation, the latest jobs figures may give officials some reason to believe their policies are cooling the labor market too much.
“Bad news is no longer good news for stocks,” said John Lynch at Comerica Wealth Management. “Of course, we’re in a period of seasonal weakness, but sentiment is fragile given economic, political, and geopolitical developments. Pressure will escalate on the Federal Reserve.”
Wall Street giants like Citigroup Inc. and JPMorgan Chase & Co. are now calling for more aggressive Fed action.
Speaking on Bloomberg Television, Chicago Fed President Austan Goolsbee said officials won’t overreact to any one piece of data, echoing comments by Jerome Powell on Wednesday.
To Scott Wren at Wells Fargo Investment Institute, markets have turned attention from “when and how much will the Fed ease” to a mindset of “growth looks like it is plunging and the Fed is behind the curve.”
“After the big equity run higher, investors are taking money off the table and booking profits,” Wren said. “Expect the near-term volatility to continue.”
The S&P 500 slid 1.8%. The Nasdaq 100 sank 2.4%.
The Russell 2000 tumbled 3.5%.
Wall Street’s “fear gauge” — the VIX — soared toward its highest since March 2023.
Intel Corp. plunged 26% on a grim growth forecast.
Amazon.com Inc. slid about 9% on a profit miss.
Treasury 10-year yields declined 18 basis points to 3.8%.
The dollar fell 0.7%.
“Oh dear, has the Fed made a policy mistake?” said Seema Shah at Principal Asset Management. “The labor market’s slowdown is now materializing with more clarity. A September rate cut is in the bag and the Fed will be hoping that they haven’t, once
again, been too slow to act.”
Nonfarm payrolls rose by 114,000 — one of the weakest prints since the pandemic — and job growth was revised lower in the prior two months.
The unemployment rate unexpectedly climbed for a fourth month to 4.3%, triggering a closely watched recession indicator.
“This marks an official ‘growth scare’ and one that the Fed will have to pay close attention to,” said George Mateyo at Key Wealth. “To be true, the economy is still expanding and jobs are still being added, so calls that a recession is upon us are over-stated in our view. But the economic environment is changing quickly and the Fed should be attentive to downside risks.”
How much should investors worry about a slowdown? “The big question is are we sliding right into a recession? “Or is the economy simply hitting a rough spot?” said Ryan Detrick at Carson Group. “We’d side with we will still avoid a recession — but the risks are rising.”
At Evercore, Krishna Guha says he doesn’t think the evidence overall suggests the labor market is cracking — but it is clearly softening and may weaken more — so there is ample cause for the Fed to pull forward cuts.
To Lara Castleton at Janus Henderson Investors, the “soft landing narrative” is now shifting to “worries about a hard landing.” While fears of a policy mistake are rising, she thinks one negative miss shouldn’t lead to overreaction given that other data points that still show economic resilience.
“Equities selling off should be seen as a normal reaction, especially considering the high valuations in many pockets of the market,” she said. “It’s a good reminder for investors to focus on the earnings of companies going forward.”
With just three meetings left, swap pricing shows anticipation that the Fed will make an unusually large half- point move at one of the gatherings or act between its scheduled meetings — indicating that policymakers will start moving rapidly to bolster growth.
Yet, large moves have signaling effects that communicate an emergency or aggressive response.
To many Fed-watching economists, Friday’s labor market data didn’t rise to a level of imminent threat that has caused the committee to make big moves in the past.
To Chris Low at FHN Financial, the market is “probably right” to think the Fed should cut by 50 basis points, but psychology is as important as data at turning points.
“FOMC participants are more likely to take it slowly with a quarter-point cut at first, if for no other reason than to project calm and control,” he said.
“From a Fed perspective, this does not translate into making hasty policy decisions, but it should help them remove the rose-tinted glasses when assessing policy decisions at the next meeting,” said Charlie Ripley at Allianz Investment Management.
Stocks are likely to fall when the Fed delivers its first rate cut because the pivot will come as data signal a hard — rather than soft — landing for the US economy, according to Bank of America Corp.’s Michael Hartnett.
In the history of the start to Fed easing since 1970, cuts in response to a downturn have proved negative for stocks and positive for bonds, the BofA strategist wrote in a note, citing seven examples that demonstrated this pattern.
“One very important difference in 2024 is extreme degree to which risk assets have front-run Fed cuts,” Hartnett said.

Some of the main moves in markets:
Stocks
* The S&P 500 fell 1.8% as of 4 p.m. New York time
* The Nasdaq 100 fell 2.4%
* The Dow Jones Industrial Average fell 1.5%
* The MSCI World Index fell 2%
* The Russell 2000 Index fell 3.5%
Currencies
* The Bloomberg Dollar Spot Index fell 0.7%
* The euro rose 1.1% to $1.0912
* The British pound rose 0.5% to $1.2809
* The Japanese yen rose 1.9% to 146.59 per dollar
Cryptocurrencies
* Bitcoin fell 3.2% to $62,592.26
* Ether fell 4.9% to $3,011.61
Bonds
* The yield on 10-year Treasuries declined 18 basis points to 3.80%
* Germany’s 10-year yield declined seven basis points to 2.17%
* Britain’s 10-year yield declined five basis points to 3.83%
Commodities
* West Texas Intermediate crude fell 3.1% to $73.97 a barrel
* Spot gold fell 0.4% to $2,436.77 an ounce

This story was produced with the assistance of Bloomberg Automation.
–With assistance from Andre Janse van Vuuren, Lynn Thomasson and Lu Wang.

Have a wonderful weekend everyone.

Be magnificent!
As ever,

Carolann
Hypocrisy in anything whatever may deceive the cleverest and most penetrating man,
but the least wide-awake of children recognizes it, and is revolted by it,
however ingeniously it may be disguised. –Leo Tolstoy, 1828-1910.

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