February 18, 2014 Newsletter

Dear Friends,

Tangents:

Planet Pluto was discovered on this day in 1930.

Also on this day in 1885,

129 years ago

Mark Twain‘s Adventures of Huckleberry Finn is published in the United States.

Photos of the day

Canada’s Travis Gerrits jumps during the men’s freestyle skiing aerials qualification round, Monday, Feb.17. Mike Blake/Reuters

(L. to r.) United States’ Trevor Jacob, Spain’s Lucas Eguibar, Canada’s Kevin Hill, United States’ Alex Deibold, and Russia’s Nikolay Olyunin compete during the men’s snowboard cross semifinal at the Rosa Khutor Extreme Park, Tuesday, Feb. 18. Jae C. Hong/AP

Market Closes for February 18^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

Feb. 18 (Bloomberg) — Canadian stocks rose a 10th day, the longest streak in almost two decades, as BlackBerry Ltd. snapped four days of losses after an analyst upgrade.

BlackBerry, the smartphone maker, increased 3.2 percent after analysts with FBR & Co. raised the stock’s rating to market perform as the company shifts into different businesses.

Nevsun Resources Ltd. jumped 5.7 percent after raising its estimate of copper resources at a mine in Eritrea. Just Energy Group Inc., which sells natural gas to residences, added 6.5 percent as the commodity’s price surged to a three-week high in New York amid winter storms across the U.S.

The Standard & Poor’s/TSX Composite Index rose 22.71 points, or 0.2 percent, to 14,077.47 at 4 p.m. in Toronto. The benchmark equity gauge has jumped 4.4 percent in 10 days for the longest rally since March 1995 and is trading at its highest level since 2011. Canadian markets were closed yesterday for the Family Day holiday in Toronto.

“If the market goes up too quickly we may see a correction, but if the market continues to grind up we won’t have one,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto. The firm manages about C$4.7 billion ($4.3 billion). “As we get closer to bank earnings season, people are feeling good about the economy and bidding them higher.”

Six of 10 industries in the S&P/TSX advanced on trading volume 17 percent higher than the 30-day average.

A gauge of health-care stocks rose the most after Valeant Pharmaceuticals International Inc. jumped 4.6 percent to a record C$160.38. Leerink Partners LLC said it was unlikely Valeant would bid for Forest Laboratories Inc. after Actavis Plc, the world’s second-largest generic-drug maker by market value, agreed to buy Forest for about $25 billion.

BlackBerry added 3.2 percent to C$10.37, the first gain in five days. Analyst Scott Thompson at FBR raised his 12-month price target to $10 from $6.75. The company’s management, now led by John Chen, is shifting away from the competitive smartphone business and into other areas including mobile device management and BlackBerry Messenger.

Just Energy Group added 6.5 percent to C$8.84, the highest in a year, and Atlantic Power Corp., which owns power generation projects, surged 7.4 percent to C$3.05 to pace gains among utilities stocks. The industry added 0.6 percent as a group today, as storms and frigid weather across Canada and the U.S. have boosted heating demand and kept families indoors.

Natural gas futures jumped 6.5 percent and are up 31 percent this year, as the inclement weather has cut stockpiles to the lowest in 10 years.

Nevsun Resources surged 5.7 percent to C$4.64 after increasing its total indicated resource estimate for the combined operations at its Bisha mine in Eritrea by 29 percent. This includes an additional 247 million pounds of copper and 47 million pounds of zinc.

Air Canada, the nation’s largest airline, dropped 2.4 percent to C$5.60 for a fourth day of declines since reporting worse-than-projected earnings on Feb. 12. The stock, the best performer in 2013, has slumped 28 percent during that time.

“We are currently at a crossroads” with short-term data suggesting a pullback in the near future for both the S&P/TSX and S&P 500, said Javed Mirza, a technical analyst at RBC Capital Markets, in a report to clients yesterday. The U.S. equities benchmark fluctuated today near an all-time high.

If the Canadian gauge falls below the early February lows of 13,450, then it is likely a longer correction is developing, Mirza said. A “sideways move” in price in the next one to three weeks would instead suggest a rally over the next one to two quarters, the analyst wrote.

USA
By Nick Taborek and Corinne Gretler

Feb. 18 (Bloomberg) — Most U.S. stocks rose, with the Standard & Poor’s 500 Index climbing to within eight points of a record, as a $25 billion deal to acquire Forest Laboratories Inc. offset slower growth in New York-area manufacturing.

Forest Laboratories surged 28 percent after Actavis Plc agreed to buy the maker of the Alzheimer’s drug Namenda. Coca- Cola Co. dropped 3.8 percent as fourth-quarter profit fell. D.R. Horton Inc. and PulteGroup Inc. lost more than 1.2 percent as a gauge of homebuilder confidence declined by the most on record in February amid bad weather that hurt sales.

The S&P 500 added 0.1 percent to 1,840.76 at 4 p.m. in New York, near its record close of 1,848.38 set last month. The Dow Jones Industrial Average fell 23.99 points, or 0.2 percent, to 16,130.40. About 6.3 billion shares changed hands on U.S. exchanges, in line with the three-month average. The U.S. market was closed yesterday for the Presidents’ Day holiday.

“Weaker economic numbers have been shrugged off,” Eric Green, director of research and fund manager at Penn Capital Management, said by phone. The Philadelphia-based firm oversees about $7 billion. “It seems like the consensus view is that weather is a huge issue in the numbers. The outlook looks pretty benign right now. We can probably reach new highs in the near term in the equity markets.”

The S&P 500 finished its best week of the year within 0.5 percent of its all-time high on Feb. 14, amid better-than- forecast earnings and continued confidence in the strength of the world’s biggest economy.

Equities rose last week as Federal Reserve Chair Janet Yellen pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps.” Economic growth has strengthened and there is “broad improvement” in the labor market, she said, adding that only a “notable change in the outlook” for the economy would prompt the central bank to slow the pace of tapering.

The Fed will release minutes from its Jan. 28-29 meeting tomorrow, giving investors details on central bank policy makers’ decision to trim bond purchases by $10 billion for a second time. Three rounds of stimulus have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009. Investors have dismissed weaker-than-forecast economic data including January’s payrolls over the past two weeks, helping stocks recover from their worst start of a year since 2010. The S&P 500 had slumped as much as 5.8 percent since reaching a record on Jan. 15 as concern over Fed tapering fueled an exodus in emerging markets. The index has since climbed 5.7 percent, paring its 2014 loss to 0.4 percent.

Data today showed manufacturing in New York, northern New Jersey and southern Connecticut slowed this month. The Fed Bank of New York’s general economic index fell to 4.48 in February from 12.5 in January. Economists in a Bloomberg News survey predicted the index would decline to 8.5. Positive readings mean that activity expanded.

While the Fed has started slowing the pace of its bond buying, the Bank of Japan boosted lending programs today. The People’s Bank of China sold repurchase contracts for the first time since June, draining funds from the banking system.

“It seems as if central banks are driving markets again in the short run,” Jean-Paul Jeckelmann, who helps manage $1.5 billion in equities as chief investment officer of Banque Bonhote & Cie. in Neuchatel, Switzerland, said in an interview. “On one side, the BOJ increased the size of lending facilities, on the other the PBOC drained liquidity from the money markets. The story around central banks is far from over.”

A total of 12 S&P 500 companies were due to report earnings today. About 74 percent of those that have posted results for the fourth quarter have beaten estimates for profit and 64 percent have exceeded sales projections, according to data compiled by Bloomberg. Companies in the gauge are exceeding analyst revenue forecasts by the most since 2012, a sign rising consumer demand is fueling economic expansion.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, climbed 2.2 percent to 13.87 today, its first increase in seven sessions. The VIX has gained 1.1 percent this year.

Seven out of 10 main groups in the S&P 500 rose, as health- care shares advanced 0.9 percent for the biggest increase.

Forest Labs jumped 28 percent to $91.04. Actavis, the world’s second-largest generic-drug maker by market value, is buying Forest for about $25 billion in a deal that will transform it into a developer of brand-name drugs. Actavis rallied 5 percent to $201.47.

The deal is a win for billionaire investor Carl Icahn, Forest’s second-largest holder who gained seats on the company’s board in 2012 and 2013, and pushed for a sale. It also comes after Comcast Corp. last week announced the year’s biggest deal, a $45 billion agreement to acquire Time Warner Cable Inc.

Other pharmaceutical companies also rallied today. Drug maker Mylan Inc. climbed 4.8 percent to a record $48.30, and Regeneron Pharmaceuticals Inc. added 2.7 percent to $332.78, also an all-time high.

Zynga Inc. increased 5.8 percent to $5.15. The social gaming company reached a 19-month high after King Digital Entertainment Plc, the maker of popular smartphone games including “Candy Crush Saga,” filed to raise $500 million in an initial public offering in the U.S. today. The amount King Digital is seeking to raise is a placeholder used to calculate fees and may change.

J.M. Smucker Co. rallied 3.8 percent to $95.31 after being upgraded to overweight at Stephens Inc. The jam maker slumped 3.5 percent on Feb. 14 after forecasting a bigger sales decline than analysts had anticipated.

Coca-Cola fell 3.8 percent to $37.47 for the steepest drop in the Dow and its biggest loss since August 2011. Chief Executive Officer Muhtar Kent, facing slowing growth in emerging markets, said the company will pare supply and data-management costs and overhaul marketing programs to generate $1 billion in savings by 2016. Global sales volume rose 2 percent for the year and 1 percent for the quarter, less than the 4 percent annual and 3 percent quarterly growth reported a year ago.

Kansas City Southern lost 4.5 percent to $91.67. JPMorgan Chase & Co. cut the railroad operator to neutral from overweight, citing risks from proposed legislation in Mexico that would open access to third parties and require rates in some private contracts to be published.

An S&P index of homebuilders slid 1 percent, with 10 of its 11 members declining. The National Association of Home Builders/Wells Fargo sentiment gauge slumped to 46 this month from 56 in January. Snowstorms last week from the South to the Northeast helped reduce homebuyer traffic to its slowest pace since April.

Purchases and sales expectations also declined as builder confidence deteriorated from coast to coast, signaling construction will contribute less to economic growth at the start of 2014.

D.R. Horton lost 1.3 percent to $23.31 and PulteGroup slid 1.2 percent to $19.79.

Waste Management Inc. slid 4.5 percent to $41.72. The garbage hauling company reported fourth-quarter profit that missed estimates and forecast earnings for the year below the average analyst projection.

Have a wonderful evening everyone.

Be magnificent!

Being human,

I feel profoundly the necessity of putting an end to violence,

and I will make sure to put an end to it in myself.

Krishnamurti, 1895-1986

As ever,

Carolann

Humor is mankind’s greatest blessing.

-Mark Twain, 1835-1910

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7