February 16, 2016 Newsletter

Dear Friends,

Tangents:

On February 16^th, 1820, the Reverend Sydney Smith wrote to Lady Morpeth:

Nobody has suffered more from low spirits than I have done – so I feel for you.  1^st. Live as well as you dare.  2^nd.  Go into the shower-bath with a small quantity of water at a temperature low enough to give you a slight sensation of cold, 75°-80°.  3^rd.  Amusing books.  4^th.  Short views of human life – not further than dinner or tea.  5^th.  Be as busy as you can.  6^th.  See as much as you can of those friends who respect and like you.  7^th.  And of those acquaintances who amuse you.  8^th.  Make no secret of low spirits to your friends, but talk of them freely – they are always worse for dignified concealment.  9^th.  Attend to the effects tea and coffee produce upon you.  10^th.  Compare your lot with that of other people.  11^th.  Don’t expect too much from human life – a sorry business at the best.  12^th.  Avoid poetry, dramatic representations (except comedy), music, serious novels, melancholy sentimental people, and everything likely to excite feeling or emotion not ending in active benevolence.  13^th.  Do good, and endeavor to please everybody of every degree.  14^th. Be as much as you can in the open air without fatigue.  15^th.  Make the room where you commonly sit, gay and pleasant.  16^th.  Struggle by little and little against idleness.  17^th.  Don’t be too severe upon yourself, or underrate yourself, but do yourself justice.  18^th.  Keep good blazing fires.  19^th.  Be firm and constant in the exercise of rational religion.  20^th.  Believe me, dear Lady Georgiana, Very truly yours.

PHOTOS OF THE DAY

Customs officers stand next to a stuffed lion in a taxidermy hall as part of a fight against the trafficking of protected species at the Museum of Natural History in Paris, France, on Tuesday. French customs, who seized seven stuffed animals in 2015, deliver them to the museum for their collections. Philippe Wojazer/Reuters

A woman clad in Japanese traditional clothing pauses during a wedding photo session by a rapeseed oil field at Hamarikyu Gardens in Tokyo, Tuesday. Eugene Hoshiko/AP

Market Closes for February 16^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Jiayue Huang

     (Bloomberg) — Canadian stocks rose for a second day, as easing concerns about the global economy propped up financial and consumer companies.

     The Standard & Poor’s/TSX Composite Index rose 1.4 percent to 12,554.98 at 4 p.m. in Toronto. A two-day advance has trimmed the benchmark gauge’s decline in 2016 to 3.5 percent, making it the second best-performing developed market in the world this year, behind only New Zealand. Canadian shares joined a rally in equities worldwide Tuesday after a report tracking a credit measure in China surged to a record.

     Financial shares contributed the most to the S&P/TSX’s advance. Royal Bank of Canada added 2.1 percent, while Toronto- Dominion Bank gained 2.2 percent.

     Element Financial Corp. climbed 6.3 percent after the company announced plan to split into two public companies: Element Fleet Management and Element Commercial Asset Management. Aviation finance will be discontinued, according to a statement today.

     Consumer stocks discretionary rose 2.4 percent, the most since November 2011. Restaurant Brands International Inc. posted among the biggest gains, adding 5.9 percent after the owner of Burger King and Tim Hortons reported fourth-quarter profits that topped analysts’ estimates.

     DHX Media Ltd. gained 6.1 percent, the biggest advance since December, after the company posted quarterly earnings that beat analysts’ projections and boosted its dividend.

     Bombardier Inc. added 9.9 percent after the company said it expects to get certification for its new jet from U.S. and Europe in the first half of this year. Shares crossed below C$1 in late January and are down 68 percent over the past year.

     The resource-rich S&P/TSX is closely linked to commodity prices with raw-materials and energy producers accounting for almost 30 percent of the overall gauge. Oil prices retreated today after a pledge by Russia and Saudi Arabia to freeze output failed to convince traders the move was enough to tackle the global crude surplus. Energy companies in Canada still gained 1.4 percent. Veresen Inc. climbed 7.7 percent, while Athabasca Oil Corp. sank 8 percent.

     Raw-material producers were the only sector that fell among 10 S&P/TSX groups, as gold in the spot market slumped for a third day. Yamana Gold Inc. lost 6.7 percent.

US

By Dani Burger

     (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index posting the best two-day gain in more than five months, despite weakness in oil prices as beaten-down banks, technology and retailer shares led an advance.

     Citigroup Inc. and U.S. Bancorp climbed more than up 2.7 percent. Retailers, one of last week’s bright spots, added to their longest rally in three months with Amazon.com Inc. and Home Depot Inc. rising at least 2.6 percent. ADT Corp. soared 48 percent after agreeing to be acquired by Apollo Global Management LLC for about $6.9 billion. Community Health Systems Inc. plunged 22 percent after reporting an unexpected quarterly loss.

     The S&P 500 increased 1.7 percent to 1,895.58 at 4 p.m. in New York, bringing the gauge’s climb since Thursday’s close to 3.6 percent. The Dow Jones Industrial Average climbed 222.57 points, or 1.4 percent, to 16,196.41. The index has risen 536 points in two sessions, after losing more than 750 in the prior five days. The Nasdaq Composite Index added 2.3 percent, the most in two weeks. About 8.6 billion shares traded hands on U.S. exchanges, 6.3 percent above the three-month average.

     “What we’re seeing here are the U.S. markets trying to catch up with the rally that the rest of the world saw yesterday,” said Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. “Oil is still important, but I think the larger focus has now switched to financial stocks. People turned their focus on the impact of negative rates spreading around the world, and the impact that might have on banks’ profits.”

     Bank shares continued a rebound Tuesday from the lowest levels in nearly three years, marking the steepest back-to-back increase since 2009. Investors have sold off lenders this year amid concerns that persistently low interest rates will weigh on profits and the collapse in oil prices could increase credit risk. The Nasdaq Composite pulled further away from a bear market, after sliding last week to within 1 percent of a 20 percent drop from its record set in July.

     Investors lowered equity holdings, cutting banks at the fastest rate in almost 10 years, while raising cash to 5.6 percent of their portfolios, the highest level since November 2001, according to Bank of America Corp.’s February survey of global fund managers. The cash level represents an “unambiguous” buy signal, strategists led by Michael Hartnett, wrote in a note Tuesday.

     The S&P 500 on Friday capped a second consecutive weekly decline amid increased concern that central-bank efforts to support growth worldwide are losing potency. The benchmark is down 11 percent from an all-time high set in May.

     The Chicago Board Options Exchange Volatility Index fell 5.1 percent Tuesday to 24.11. The measure of market turbulence known as the VIX is up about 19 percent this month, on track for the most since August.

     There was evidence that investors were searching for bargains today as four of the five best performers among the S&P 500’s 10 main industries — consumer discretionary, technology, health-care and financial shares — are the most battered year to date, losing more than 8.7 percent.

     “The areas that are bouncing the hardest today are financials, particularly the banks, and discretionary stocks,” James Abate, who helps oversee $1 billion as chief investment officer at Centre Funds in New York, said by phone. “It’s a trade that says we’re not falling into a recession immediately, combined with the fact that we’re already down 10 percent year to date.”                       

     Consumer discretionary companies advanced 2.5 percent, the strongest one-day gain since Aug. 26. Industrials climbed 2 percent for the best two-day increase in four months.

     Among consumer discretionary companies, Wynn Resorts Ltd. gained 8 percent, extending last week’s rally after reporting revenue growth in Las Vegas. Under Armour Inc. and Staples Inc. added as much as 6.3 percent. Retailers rose the most since August, with Priceline Group Inc. rallying 5.3 percent before its earnings report tomorrow, while Target Corp. climbed 2.2 percent.

     Financial stocks, one of the hardest hit last week, rose for a second day, bouncing back from a 2 1/2-year low on Thursday. Banks in the benchmark have tumbled 16 percent so far this year. Fifth Third Bancorp and KeyCorp climbed more than 4 percent Tuesday, though both banks are still down at least 17 percent in 2016.

     Apple Inc. and Cisco Systems Inc. advanced more than 2.8 percent to pace gains in the technology group. Qorvo Inc. and Yahoo! Inc. added at least 8.2 percent.

     Energy shares rose 0.8 percent despite the drop in crude prices. Chesapeake Energy Corp. jumped 17 percent, bouncing after a 48 percent drop last week, its worst ever. Kinder Morgan Inc. gained 4.4 percent. Southwestern Energy Co. and Range Resources Corp. fell more than 5 percent.

     West Texas Intermediate crude futures fell 1.4 percent, paring an earlier 2.5 percent slide. The world’s two largest crude producers — Saudi Arabia and Russia — said they would hold output at January levels. Oil struggled to rally amid speculation that the production freeze would do little to reduce the glut of crude. Today was the first time in two months that the S&P 500 rose more than 1 percent on a day when oil declined.

     Also moving on company news, Freeport-McMoRan Inc. increased 15 percent to a one-month high. The copper producer announced Monday it would sell a 13 percent stake in one of its biggest mines in an attempt to rein in debt as copper prices fall.

     Groupon Inc. surged 41 percent, the most ever, after Alibaba Group Holding Ltd. bought a 5.6 percent stake in the online deals website, making it the fourth-largest shareholder. Hormel Foods Corp. rallied 7.1 percent to a record, the strongest increase in seven years, after the maker of Spam and Jennie-O turkey increased its annual forecast, helped by demand for refrigerated foods.

     Boeing Co. rebounded 3.7 percent following its worst weekly decline in more than five years. Iran Air said it’s open to buying aircraft from Boeing even after ordering 118 jetliners worth $27 billion from competing plane maker Airbus Group SE.

The aerospace company’s shares tumbled last week after Bloomberg reported that regulators were investigating its accounting on two of its jetliners.                        

     Investors are also monitoring economic reports, after a tumultuous start to the year that pushed U.S. equities as much as 14 percent below the record. Data today showed manufacturing in the New York region declined at a slower pace this month, though it was worse than forecasts by economists surveyed by Bloomberg. A separate report indicated confidence among U.S. homebuilders dropped to a nine-month low.

     Also due this week are January housing starts, gauges on producer and consumer prices, industrial production and minutes from the Federal Reserve’s last meeting.

     The earnings season, more than three-quarters through, hasn’t provided much relief for equities. Of the S&P 500 firms that have reported so far, about 75 percent have exceeded profit projections, while less than half have topped sales forecasts. Analysts estimate earnings at S&P 500 companies fell 4.5 percent in the fourth quarter, better than Jan. 15 predictions for a 7 percent slump. Priceline, Wal-Mart Stores Inc. and Deere & Co. are among companies reporting this week.
 

Have a wonderful evening everyone.

Be magnificent!

The real ornament of woman is her character, her purity.

Mahatma Gandhi

As ever,
 

Carolann

Without a struggle, there can be no progress.

                -Frederick Douglass, 1818-1895

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7