February 12, 2025 Newsletter

Dear Friends,

Tangents: Full moon tonight – the “Snow Moon” – last full moon of winter.  It’s Darwin Day, Charles Darwin’s birthday.

February 12, 1912: The last Emperor of China, Puyi, abdicates, leading to the establishment of the Republic of China and significant political reforms.
February 12, 1999: The Senate voted to acquit President Bill Clinton on charges of perjury and obstruction of justice. Go to article.

Abraham Lincoln President of the US, b. 1809.
Charles Darwin, naturalist, b. 1809.
R. Buckminster Fuller, architect, b. 1895.

How to watch February’s full snow moon
Greetings, skywatchers. You may still have a chance to see a full snow moon today along with Venus, Mars, Jupiter and Saturn before they fade from view.

Photo gallery: The 149th Westminster Kennel Club Dog Show
A giant schnauzer named Monty won Best in Show at the Westminster Kennel Club Dog Show on Tuesday. It’s im-paws-sible not to love this adorable face.

Paul McCartney surprised New Yorkers with a one-night-only show
The Beatles legend gave NYC an opportunity to “come together” for one night, and one night only –– for a surprise concert in Lower Manhattan.

Chocolate prices are up 20% this Valentine’s Day
Finding sweet deals on chocolate may be harder this Valentine’s Day due to the rising price of cocoa.

127.7 million:  That’s how many viewers tuned into Sunday’s Super Bowl, which saw the Philadelphia Eagles defeat the Kansas City Chiefs. That marks a 3% increase over last year’s record-breaking game.

People have been dumping corpses into the Thames since at least the Bronze Age, study finds
A new study of human remains dredged from the Thames River reveals that people frequently deposited corpses there in the Bronze and Iron ages. Read More.

World’s biggest underground thermal lake discovered in Albania at bottom of 330-foot abyss
Researchers have returned to an underground thermal lake they first came across in 2021 in southern Albania and confirmed it is the largest of its kind known in the world. Read More.

100-year-old heart drug made from foxglove may help ‘dissolve’ clumps of spreading cancer cells
The heart drug digoxin could potentially be combined with existing cancer therapies to prevent the spread of tumors, an early trial suggests. But questions remain. Read More.

World’s 1st hybrid quantum supercomputer goes online in Japan
Japan’s Fugaku supercomputer has gained an edge following the installation of the Reimei quantum computer. Read More.

PHOTOS OF THE DAY

Istanbul, Turkey
A view of the Bosphorus on a foggy morning
Photograph: Isa Terli/Anadolu/Getty Images

Washington DC, US
Snow covers the north lawn of the White House
Photograph: Ting Shen/AFP/Getty Images
London, UK
‘A winter rose in our garden.’
Photograph: Sofoulis Iacovou
Market Closes for February 12, 2025

International Markets

Bonds

Currencies

Commodities

MARKET COMMENTARY:
A jack oof all trades will never be rich. – Adam Smith, The Wealth of Nations.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell for the second day, dropping 0.3%, or 68.72 to 25,563.11 in Toronto.
Shopify Inc. contributed the most to the index decline, decreasing 2.5%.
TerraVest Industries Inc. had the largest drop, falling 10.4%.
Today, 118 of 221 shares fell, while 102 rose; 6 of 11 sectors were lower, led by energy stocks.
Insights
* The index advanced 21% in the past 52 weeks. The MSCI AC Americas Index gained 20% in the same period
* The S&P/TSX Composite is 1.2% below its 52-week high on Jan. 30, 2025 and 24.9% above its low on Feb. 13, 2024
* The S&P/TSX Composite is little changed in the past 5 days and rose 3.2% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 21.1 on a trailing basis and 17.8 times estimated earnings of its members for the coming year
* The index’s dividend yield is 2.7% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$4.14t
* 30-day price volatility fell to 10.76% compared with 10.85% in the previous session and the average of 11.21% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Energy | -61.4058| -1.4| 10/33
Information Technology | -37.7789| -1.3| 3/7
Industrials | -16.8950| -0.5| 7/21
Consumer Discretionary | -9.3525| -1.1| 1/10
Real Estate | -4.6054| -1.0| 2/18
Utilities | -0.3822| 0.0| 10/5
Health Care | 0.1480| 0.2| 3/1
Consumer Staples | 2.2566| 0.2| 8/2
Communication Services | 5.8573| 1.0| 4/1
Financials | 13.7762| 0.2| 17/7
Materials | 39.6588| 1.2| 37/13
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
Shopify | -38.1400| -2.5| 31.2| 12.5
Canadian Natural Resources | -18.9200| -2.9| 21.5| -3.3
TD Bank | -13.7200| -1.3| -14.5| 11.8
Wheaton Precious Metals | 6.6090| 2.2| -3.9| 20.6
Intact Financial | 17.5300| 5.1| 39.1| 10.9
Barrick Gold | 18.9800| 6.4| 78.2| 16.5
US
By Rita Nazareth
(Bloomberg) — The world’s biggest bond market got hammered as hot inflation data spurred bets the Federal Reserve won’t have much room to cut rates this year.
Oil sank as President Donald Trump said he agreed with Russian President Vladimir Putin to begin talks on ending the war in Ukraine.
Treasury 10-year yields soared the most since Dec. 18 when hawkish Fed signals rattled trading.
Money markets adjusted bets on US rate cuts, now projecting the first – and only reduction this year – in December.
Almost every major group in the S&P 500 fell, though the gauge pared most of a 1.1% slide as Tesla Inc. led gains in mega caps and Meta Platforms Inc. rose for an 18^th straight session.
For the first time since November, the Nasdaq 100 erased an intraday loss of 1%.
US inflation picked up broadly at the start of the year, with the monthly consumer price index rising in January by the most since August 2023.
Fed Chair Jerome Powell said the latest CPI shows that while the central bank has made substantial progress toward taming inflation, there is still more work to do, “so we want to keep policy restrictive for now.”
“Higher-for-longer may have just gotten a little longer,” said Ellen Zentner at Morgan Stanley Wealth Management.
“The Fed has been waiting for clear signs that inflation is trending lower again, and this morning they got the opposite. Until that changes, the markets are going to have to remain patient about additional rate cuts.”
Steve Sosnick at Interactive Brokers says it’s really tough to take today’s numbers in stride.
“The bond market didn’t,” he said.
“One feature of the current equity market seems to be this mantra: ‘Every dip is a buying opportunity. The bigger the dip, the bigger the opportunity’.”
Sosnick notes that in a way stocks can be a hedge against modest inflation, since earnings per share are measured in nominal terms. Inflation raises those nominal results, particularly for companies with relatively inelastic demand for their products.
“The largest tech stocks fit that bill, at least while the enthusiasm for all things related to artificial intelligence continues,” he noted.
“And thus, the dips get bought, even with a hot, hot, hot inflation report.”
The S&P 500 fell 0.3%.
The Nasdaq 100 rose 0.1%.
The Dow Jones Industrial Average slid 0.5%.
The yield on 10-year Treasuries advanced 10 basis points to 4.64%.
Bonds did not move much in response to a weak $42 billion US auction that saw the highest coupon rate since 2007.
The Bloomberg Dollar Spot Index was little changed.
West Texas Intermediate crude fell 2.7% to $71.35 a barrel.
Gold was little changed.
The so-called core CPI — which excludes food and energy costs — increased 0.4% in January after a 0.2% advance in December, Bureau of Labor Statistics figures showed Wednesday.
From a year ago, it rose 3.3%. The headline measure rose 0.5% from December and 3% from the year before.
“Today’s inflation report will make for very uncomfortable reading for the Fed,” said Seema Shah at Principal Asset Management.
“If this persists into the next few months, inflation risks may become too heavily weighted to the upside to permit the Fed to cut rates at all this year.”
Chris Zaccarelli at Northlight Asset Management, although it’s too early to predict that officials will begin raising rates any time soon, the market is going to start seriously considering that the next move the Fed makes – even if it is in late 2025 or early 2026 – is going to be a hike and not a cut.
“So caution is warranted,” he said. To Aditya Bhave at Bank of America Corp., the latest figures increase his conviction that the cutting cycle is over.
“Hikes remain unlikely, but they seem less inconceivable now,” Bhave said.
At the Blue Chip Daily Trend Report, Larry Tentarelli says while he does not expect any immediate change in Fed policy, if there is a series of two or three hot inflation reports, they could put pressure on the Fed to raise rates.
“In the near-term, we expect higher bond yields and higher volatility in equity markets,” he said.
“Investors should keep a close eye on the 10-year US Treasury yield. Any move closer to or above 4.80% could create negative near-term headwinds for stocks.”
Matt Maley at Miller Tabak noted that Wednesday’s CPI, last week’s employment report and concerns over tariffs have all taken the yield on the 10
-year note back above its trend-line from last September.
“This does not mean that they will push above 5% level soon nor that these yields will not reverse lower at some point later this year,” Maley said.
“However, it should raise concerns that the Fed will wait quite a bit longer to cut short-term rates than the Street had been thinking until recently and also raise concerns that Secretary Scott Bessent’s goal of lower long-term yields will take longer to achieve as well.”
The yield on 10-year US Treasury notes is indeed an important benchmark that helps price trillions of dollars in global assets.
On Feb. 6, US Treasury Secretary Scott Bessent said he sees it as a key metric and catalyst for the economy.
The former hedge fund manager believes declines in 10-year Treasury yields — a trend he sees continuing to unfold — are a sign that bond investors are reacting positively to the Trump administration’s policies, which he sees sparking “non-inflationary growth.”
The jump in US inflation last month that surprised investors was mostly due to the way the government adjusts for typical price increases at the start of the year, according to Bloomberg Economics.
While the report spooked markets and reduced odds of a Fed interest-rate cut in the first half of the year, the advances were “mostly due to residual seasonality — the ‘January effect’ — limiting the signal from the hot print,” Bloomberg Economics’
Anna Wong and Stuart Paul wrote. At the same time, inflation ran a touch cooler at the end of 2024.
“Residual seasonality was likely at play in the January CPI report, but we think the data still showed underlying price pressures,” said Andy Schneider at BNP Paribas.
“While the Fed is cognizant of the pattern of early-year inflation strength, the print will do little to ease policymakers’ inflation anxieties.”
To Jamie Cox at Harris Financial Group, lack of progress on inflation is the story here.
“This is not the start of a resurgence in inflation,” he said.
“Food and energy are big players in the hot reads, so there’s a chance we get a little reprieve in the spring.”
Mark Hackett at Nationwide, says today will be a test of investor psychology and commitment to the buy-the-dip instinct, as inflation continues to be a primary tail risk for the Goldilocks narrative.
“We have been concerned about inflation as a risk for some time, and believe that while risk markets can go higher, it will be a choppier trajectory than the last two years,” said Sameer Samana at Wells Fargo Investment Institute.
“Investors should use pullbacks to add to U.S. large-cap equities and the energy, financials, industrials, and communication services sectors.
Samana says he would also use moves higher on the 10-year Treasury towards 4.5%-5% to add to lengthen the duration of portfolios and lock in what he believes to be attractive yields.
US PREVIEW: PPI Components Likely to Suggest Core PCE at 0.33%
Swap contracts linked to future Fed decisions, which previously anticipated a rate cut by September, repriced to imply just one quarter-point cut this year.
“Markets priced out cuts in the cycle as the firmer inflation print keeps the Fed on their toes as they assess the impacts of tariff policies as well as the deceleration in inflation from restrictive Fed policy,” said TD Securities strategists including Oscar Munoz and Gennadiy Goldberg.
“We remain long 10-year rates and view levels as attractive entry points.”
All else equal, hotter inflation would likely keep the Fed from cutting rates sooner, which would in turn result in a stronger dollar, according to Richard Flynn at Charles Schwab.
“The dollar’s strength could help offset some of the inflationary pressures in the economy and from tariffs. It also makes US Treasuries attractive to hold, helping to mitigate some of the upward pressure on yields,” Flynn said.
“The immediate reaction to today’s report will likely weigh on stocks in the short term, as a higher-than-expected print further lowers the odds of rate cuts from the Fed this year and stokes investors’ reflationary fears,” said Bret Kenwell at eToro.
To Dan Wantrobski at Janney Montgomery Scott, the issue is that US equity markets have been “positioned for perfection” for quite some time now, which means any potholes on the macro front could lead to elevated volatility over the short run (like we are seeing today).
“And when we say positioned for perfection, we note the difference vs being priced to perfection: we are not at peak valuation in this current cycle, and thus the market multiple has a good deal of bandwidth for further expansion in the coming years in our opinion (reflationary bull market cycle),” he said. however, we are seeing an historic skew of equity positioning by both Main Street and institutional investors at this time.”
Wantrobski notes that effectively, long equities remains a very crowded trade at this time- and this is despite the recent pairing of large-cap tech exposure by the buyside.
“This makes for a very lopsided position in our view, which leaves little room for error (like today’s hotter-than- anticipated CPI print).”

Wall Street’s Reaction to CPI:
* Tiffany Wilding at Pacific Investment Management Co.:
Today’s data doesn’t change the narrative that US economic momentum was solid over the turn of the year, while inflation progress stalled. If anything, this further confirms US Federal Reserve rhetoric to hold rates steady for a while. We think inflation is likely to hold steady at uncomfortably elevated levels through 2025 (~3% core CPI).
* Jim Baird at Plante Moran Financial Advisors:
For now, it’s a “wait and see” approach for Fed Chair Jay Powell and his colleagues, who recognize that the case for further easing in the near term has been reduced. Rate hikes don’t appear to be on the table, but a sustained resurgence in inflation could change that.
* Josh Jamner at ClearBridge Investments:
The “wait and see” Fed is going to be waiting longer than anticipated after a red-hot January CPI inflation report. Prices jumped more than expected and in a broad-based fashion which is consistent with yesterday’s comments from Chair Powell that the Fed is not “in a hurry” to adjust interest rates. This report puts the final nail in the coffin for the rate cut cycle, which we believe is over.
Today’s hotter print shifts investor expectations for monetary policy, which lends to upward pressure on long-term interest rates and downward pressure on equities. Not all equities are impacted equally, however, with more indebted companies facing headwinds from higher rates while others will ultimately benefit from higher revenues as they are able to charge more for their products. We believe value should outperform growth in such an environment.
* Whitney Watson at Goldman Sachs Asset Management:
Today’s stronger than expected CPI release is likely to further cement the FOMC’s cautious approach to easing. A resilient labor market also provides scope for patience.  We think the Fed is likely to remain in “wait and see mode” for the time being and anticipate the Fed staying on hold at next month’s meeting.
* Michael Brown at Pepperstone:
These figures should see the Fed maintain their patient stance, being in no hurry to deliver another rate cut. Consequently, any rate reductions in the first half of 2025 now seem highly unlikely.
* Skyler Weinand at Regan Capital:
With this very strong CPI print, the Federal Reserve is on hold when it comes to interest rates for at least the remainder of 2025.
Inflation and inflation expectations are both rising, which is something the Fed needs to counter by keeping rates higher for longer.
The Fed has nothing to do at this point but wait and see, and hope that the economic indicators change to suggest more progress on inflation.  If consumer prices or inflation expectations rise any further, it is quite possible that the Fed’s next move is to raise short term interest rates.

Corporate Highlights:
* Chevron Corp. plans to cut its global workforce by 15% to 20% by next year, as part of efforts to reduce costs at the US oil major.
* Kraft Heinz Co. said it will discount key items in the coming year while improving products and boosting marketing in order to compete for inflation-weary customers.
* DoorDash Inc., the largest food delivery service in the US, issued an outlook for orders in the first quarter that surpassed Wall Street’s expectations, serving as yet another sign that consumer demand remains resilient.
* CVS Health Corp. shares climbed the most in more than 25 years after its fourth-quarter results signaled improved performance from the company whose insurance and drugstore units have been struggling.
* Spirit Airlines Inc. rejected a refreshed acquisition offer from rival budget carrier Frontier Group Holdings Inc., saying it would instead proceed with a planned restructuring in bankruptcy.
* Biogen Inc. forecast a bigger decline in annual sales than Wall Street expected, dimming the drugmaker’s strong finish to 2024.

Key events this week:
* Eurozone industrial production, Thursday
* US initial jobless claims, PPI, Thursday
* Eurozone GDP, Friday
* US retail sales, industrial production, business inventories, Friday
* Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 fell 0.3% as of 4 p.m. New York time
* The Nasdaq 100 rose 0.1%
* The Dow Jones Industrial Average fell 0.5%
* The MSCI World Index fell 0.2%
Currencies
* The Bloomberg Dollar Spot Index was little changed
* The euro rose 0.3% to $1.0390
* The British pound was little changed at $1.2445
* The Japanese yen fell 1.3% to 154.43 per dollar
Cryptocurrencies
* Bitcoin rose 0.6% to $96,978.82
* Ether rose 2.1% to $2,678.15
Bonds
* The yield on 10-year Treasuries advanced 10 basis points to 4.63%
* Germany’s 10-year yield advanced five basis points to 2.48%
* Britain’s 10-year yield advanced three basis points to 4.54%
Commodities
* West Texas Intermediate crude fell 2.7% to $71.35 a barrel
* Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.
–With assistance from Lu Wang, John Viljoen, Sujata Rao, Allegra Catelli and Aya Wagatsuma.

Have a lovely evening.

Be magnificent!
As ever,

Carolann
Life isn’t about finding yourself. Life is about creating yourself. –George Bernard Shaw, 1856-1950.

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
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www.carolannsteinhoff.com