December 23, 2011 Newsletter

Dear Friends,

  “…At Christmas play and make good cheer, for Christmas comes but once a year…”

Photo of the Day:

Market Commentary

Canada

 By Matt Walcoff

 Dec. 23 (Bloomberg) — Canadian stocks rose for a fourth day as banks and commodity producers gained after a bigger-than- forecast increase in durable goods orders in the U.S., Canada’s biggest export market. Royal Bank of Canada, Canada’s largest lender by assets, advanced 0.8 percent. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, advanced 2.8 percent after an analyst at Susquehanna International Group LLP raised his rating on the company. The Standard & Poor’s/TSX Composite Index advanced 50.19 points, or 0.4 percent, to 11,926.67, extending its weekly increase to 2.5 percent.

 “Over the past five or six weeks, the somewhat promising signs out of the U.S. have been partially responsible for offsetting some of the mixed news coming out of Europe,” Karl Berger, a money manager at Toron Investment Management in Toronto, said in a telephone interview. The firm oversees about C$400 million ($393 million). “Canadian exports are predominantly U.S. in nature. You feel a little bit different about the Canadian economy if the U.S. economy picks up.”

The S&P/TSX has rallied 3.4 percent in four days, led by energy companies and banks, as U.S. housing starts climbed to the highest level since April 2010, initial jobless claims declined to the lowest since April 2008 and oil supplies plunged the most since 2001. The U.S. accounted for 75 percent of Canada’s exports last year, according to Statistics Canada, and the U.S. imports more oil from Canada than from any other country, according to the U.S. Energy Department.

 Orders for equipment meant to last at least three years rose 3.8 percent in November, the Commerce Department said today in Washington. Economists had forecast a gain of 2.2 percent, according to the median estimate in a Bloomberg survey. The S&P/TSX Commercial Banks Index advanced to the highest level since Oct. 31. Royal Bank climbed 0.8 percent to C$51.30.

Toronto-Dominion Bank, its biggest domestic rival, rose 0.6 percent to C$75.02. Bank of Nova Scotia, Canada’s third-largest lender by assets, increased 0.8 percent to C$50.91. Energy stocks advanced as crude oil gained for a fifth day. Suncor Energy Inc., the country’s largest oil and gas producer, climbed 1.3 percent to C$29.28. Vermilion Energy Inc., which operates in France, Australia, Canada and the Netherlands, increased 2.5 percent to C$45.83. PetroBakken Energy Ltd., a western Canadian oil and gas producer, rose 5.3 percent to C$13.02 to extend its weekly surge to 20 percent.

 Talisman rallied 2.8 percent to C$12.75 after Gray Peckham, an analyst at Susquehanna, boosted his rating on the shares to “positive” from “neutral.” The analyst cited Talisman’s plans to redirect investment toward North American projects.

Oilfield-services company North American Energy Partners Inc. soared 34 percent, the most since November 2008, to C$7.17 after saying it will resume digging and hauling operations at Canadian Natural Resources Ltd.’s Horizon oil-sands project today.

Bombardier Inc., the maker of trains and airplanes, rallied 3.8 percent to C$3.86 after saying it won an order for 90 trains from DB Regio AG worth about 500 million euros ($653 million). Canadian markets are to reopen Dec. 28 after the Christmas and Boxing Day holidays.

US

By Whitney Kisling and Jeff Sutherland

 Dec. 23 (Bloomberg) — U.S. stocks rose, erasing the 2011 decline for the Standard & Poor’s 500 Index, amid further signs of strength in the world’s largest economy. Treasuries declined while commodities advanced.

The S&P 500 added 0.9 percent to 1,265.33 at 4 p.m. New York time. The Dow Jones Industrial Average jumped 1 percent to 12,294, the highest level since July 27. The MSCI All-Country World Index advanced 0.8 percent, rising for a fourth straight day. Copper rallied 1.6 percent and crude oil briefly topped $100 a barrel. Yields on 30-year Treasuries climbed eight basis points and increased the most in a week since October. Orders for U.S. durable goods jumped in November by the most in four months, data showed today, helping to offset weaker-than-forecast consumer spending. Sales of new U.S. homes rose in November to a seven-month high. The U.S. Congress passed a two-month payroll tax cut extension a day after House Republicans surrendered on whether to endorse the measure days before its scheduled Dec. 31 expiration.

“The market’s holding up,” Paul Zemsky, the New York- based head of asset allocation for ING Investment Management, said in a telephone interview. His firm oversees $550 billion.“It’s important to take it all with the totality of the week, we had fantastic data on housing and jobs earlier this week, so overall, this data is weak, but the jobless claims trumps it because it’s more forward-looking.”

 A four-day rally in the S&P 500 erased the index’s decline for the year, giving it a 0.6 percent gain for 2011. The gauge jumped 3.7 percent this week after data on employment, consumer confidence, housing starts and leading economic indicators added to expectations that the U.S. economy can weather Europe’s debt crisis. Wall Street strategists forecast the S&P 500 will end the year at 1,278, or 1 percent higher than today’s close. With four trading days left in 2011, the benchmark index for U.S. equities would need to climb about 0.2 percent each day to reach their projection. On average, the S&P 500 gains 1 percent in the last four days of the year, according to data dating back to 1928 compiled by Bloomberg.

All 10 industries in the S&P 500 advanced at least 0.6 percent today, led by consumer-discretionary stocks, technology and raw materials companies. Verizon Communications Inc. advanced 1.8 percent. Walt Disney Co. and Bank of America Corp. rose at least 2 percent, pacing gains among the largest companies. U.S. markets will be closed Dec. 26 for the Christmas holiday.

 U.S. stocks rose as orders for goods meant to last at least three months rose 3.8 percent in November, as an increase in demand for aircraft outweighed declines in spending on computers and equipment. A separate report showed purchases of single- family properties increased 1.6 percent to a 315,000 annual pace, adding to evidence of stability in the housing market.

Consumer spending rose less than forecast in November as wages declined for the first time in three months. Equities maintained gains after Congress extended a two- percentage-point payroll tax cut, following a month of wrangling among lawmakers. The measure will continue expanded unemployment benefits and head off a reduction in Medicare payments to doctors through February. Lawmakers plan to negotiate on a longer-term extension in the new year.

“That removes probably the biggest domestic threat to the economy in 2012,” David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a telephone interview. “As the year ends, some of the extremes in uncertainty are diminishing, and that should allow the market to go up.”

All of us at Queensbury would like to wish you and your family a wonderful Holiday Season for 2011

As Always,

Kyle,  for Carolann