February 26, 2014 Newsletter

Dear Friends,

Tangents:

On February 26^th, 1919, the Grand Canyon National Park was established.

45 years ago today, Golda Meir became the first female Prime Minister of Israel.

Imagination is everything.  It is the preview of life’s coming attractions.  – Albert Einstein.

Photos of the day

A man walks with an umbrella down California Street in San Francisco. Jeff Chiu/AP

People walk past crocuses and winter aconites in the Great Garden in Dresden, Germany. Jan Woitas/dpa/AP

Market Closes for February 26^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

Feb. 26 (Bloomberg) — Canadian stocks rose, with the benchmark index trading near a three-year high, as uranium miners rallied and corporate earnings topped forecasts.

MacDonald Dettwiler & Associates Ltd. added 4.7 percent after the company reported sales and earnings that surpassed estimates. Uranium miners Cameco Corp. and Denison Mines Corp. rallied at least 3.9 percent after Japan’s government indicated the country would continue to rely on nuclear generation for its power needs. Detour Gold Corp. dropped 4.7 percent as gold prices retreated from a 17-week high.

The Standard & Poor’s/TSX Composite Index rose 26.43 points, or 0.2 percent, to 14,215.41 at 2:04 p.m. in Toronto.  The benchmark equity gauge has advanced 3.8 percent in February and is 0.4 percent below its high from April 2011.

“People are pretty excited about uranium, it’s a positive for the sector,” said Matt Skipp, chief investment officer with Sw8 Asset Management Inc. in Toronto. He manages about C$40 million ($36 million). “We will take our cues from the U.S. as usual. If there’s continued weakness in base metals, that might create a lag.”

U.S. stocks advanced today, sending the S&P 500 above its record closing level, as purchases of new homes unexpectedly climbed and retailers rallied.

Japan’s government yesterday presented its draft energy policy showing nuclear as an important component in the nation’s future. Prime Minister Shinzo Abe is seeking to restart the nation’s 48 nuclear reactors, three years after a meltdown at the Fukushima Dai-Ichi power plant.

Ten Canadian companies are scheduled to report quarterly results today and another 15 plan to disclose earnings tomorrow.

Six of 10 groups in the S&P/TSX advanced, with health-care and technology stocks rising at least 1.7 percent for the biggest gains. Trading volume was 13 percent below the 30-day average at this time of day.

MacDonald Dettwiler increased 4.7 percent to C$83.84, leading industrial stocks to a 0.7 percent gain. The technology company, which makes satellites and other space equipment including the International Space Station’s Canadarm2 robotic arm, reported fourth-quarter adjusted earnings of C$1.34 a share, ahead of analysts’ estimates for C$1.28.

Denison Mines soared 9 percent to C$1.82, headed for the highest close in almost three years. The stock has rallied 30 percent in the past four days. Cameco climbed 3.9 percent to C$26.42.

“Reactor restarts remain the most important near-term catalyst for the uranium space,” said David Sadowski, analyst at Raymond James Ltd., in a note to clients.

Uranium concentrate, or yellowcake, will rise to $42 a pound by the end of this year, from the current $35.50 level, Sadowski said.

An index of materials producers lost 0.1 percent, headed for a fourth day of declines. Gold fell 1 percent in New York as a stronger dollar trimmed demand. Copper dropped 0.5 percent.

Detour Gold slid 4.7 percent to C$9.75 and OceanaGold Corp. lost 2.5 percent to C$2.70.

Royal Bank of Canada slipped 0.8 percent to C$65.05. The country’s second-largest lender by assets posted a 2.2 percent increase in profit, helped by lower provisions and credit recoveries. Earnings from personal and commercial banking fell 3 percent due to costs from its Caribbean operations.

USA
By Callie Bost and Lu Wang

Feb. 26 (Bloomberg) — U.S. stocks were little changed, after the Standard & Poor’s 500 Index erased earlier gains and failed to hold above its record closing level for a third straight day.

Chesapeake Energy Corp. slid 4.9 percent after profit fell short of estimates. First Solar Inc. tumbled 9.1 percent after posting a 58 percent drop in quarterly profit. Lowe’s Cos. and Abercrombie & Fitch Co. jumped more than 5.4 percent after announcing buyback plans. Target Corp. gained 7 percent as profit topped analysts’ estimates. An S&P index of homebuilders climbed 3 percent as Lennar Corp. and PulteGroup Inc. increased at least 2.8 percent.

The S&P 500 rose less than one point to 1,845.16 at 4 p.m. in New York. The Dow Jones Industrial Average added 18.75 points, or 0.1 percent, to 16,198.41. About 6.9 billion shares changed hands on U.S. exchanges, 7 percent above the 30-day average.

“The market in the short term is a little tired,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “Sure, we have problem breaking through it, setting new all-time highs. But I think that’s temporary. I don’t think there is going to be any material downside from these levels because there isn’t really anything that’s fundamentally driven, it’s more sentiment driven.”

The S&P 500 rose as much as 0.4 percent earlier today as sales of new homes unexpectedly climbed and retailers rallied. The gauge topped its previous closing high of 1,848.38 reached on Jan. 15, something it has done each day this week, only to retreat from that level by the end of the session.  The index came within six points of the record each day last week.  It reached an interday high of 1,858.71 on Feb. 24.

Today marks the fourth straight day the S&P 500 pared or erased gains in the afternoon. The index has lost 0.06 percent in the last hour of trading this year through yesterday, the worst hourly performance of the day, according to data from Bespoke Investment Group LLC.

The gauge has rallied 5.9 percent since a low on Feb. 3 as investors speculated that severe winter weather explains the weakness in reports such as housing and hiring. Federal Reserve Chair Janet Yellen said this month that the economy can withstand stimulus cuts, adding that only a notable change to the outlook would prompt the central bank to slow the pace of tapering. Yellen will testify tomorrow on monetary policy before the Senate.

Three rounds of stimulus have helped push the S&P 500 up as much as 173 percent from a 12-year low in 2009. The index tumbled as much as 5.8 percent from its Jan. 15 record on concern that growth was slowing in China and amid a rout in emerging-market currencies.

“We went through a snapback rally and got right back to the all-time highs,” James W. Gaul, a portfolio manager at Boston Advisors LLC, which oversees about $2.5 billion from Boston, said by phone. “Nothing has changed from a month ago, so what’s the fuel to keep pushing stocks higher. Earnings are almost over and we need news to move higher.”

Money is beginning to return to ETFs with the S&P 500 trading near record levels. About $21 billion has been added to ETFs that buy and sell American shares in the past two weeks as stock prices recovered, according to data compiled by Bloomberg.  The deposits compare with about $407 million sent to fixed income since Feb. 11.

Earnings beat analysts’ estimates at about 70 percent of the 471 companies in the S&P 500 that have posted results so far this season, according to data compiled by Bloomberg. Analysts estimate earnings for S&P 500 companies grew by 8.6 percent in the fourth quarter of 2013, according to a survey of analysts.

Data today showed sales of new U.S. homes increased 9.6 percent to a 468,000 annualized pace in January, exceeding the highest estimate of economists surveyed by Bloomberg and the most since July 2008.

The Chicago Board Options Exchange Volatility Index advanced 5 percent today to 14.35, its first increase in five days. The gauge of S&P 500 options known as the VIX is up 4.6 percent for the year.

Six of 10 main S&P 500 groups retreated, with energy and utilities stocks falling at least 0.5 percent for the biggest drops. Exxon Mobil Corp. retreated 0.5 percent for the second- largest drop in the Dow.

First Solar sank 9.1 percent to $52.74. The largest U.S. solar-panel manufacturer said profit in the fourth quarter slid as revenue slumped from the utility-scale power plants it is building in the southwest of the U.S. Net income fell to $65.3 million from $154.2 million, First Solar said in a statement.

Chesapeake Energy plunged 4.9 percent to $25.61. The second-largest U.S. natural-gas producer missed analysts’ profit estimates by the biggest margin in almost two years as energy prices fell and costs to exit leases and cut jobs rose.

Natural gas futures fell in New York, bringing the three- day slide to 20 percent, as forecast showed a less-intense cold front across the U.S. East.

DreamWorks Animation SKG Inc. plunged 12 percent to $30.91.  The independent animation studio reported that fourth-quarter revenue slumped 23 percent after home-video sales of “Turbo”  missed estimates.

Retailers had the biggest gain among 24 major industries in the S&P 500, rallying 1.4 percent.

Lowe’s advanced 5.4 percent to $50.72. The second-largest U.S. home-improvement chain announced a plan to buy back $5 billion in shares. The company also said fourth-quarter profit rose 6.3 percent as the housing rebound spurred renovation spending.

Home Depot Inc. added 0.9 percent to $81.70. The company climbed 4 percent yesterday after it posted fourth-quarter profit that topped analysts’ estimates, marking six straight years of meeting or exceeding projections.

Wal-Mart Stores Inc. had the biggest increase in the Dow, advancing 2 percent to $74.78.

Abercrombie & Fitch increased 11 percent to $40.04 after posting fourth-quarter profit that topped analysts’ estimates and saying it would buy back $150 million in shares in the current quarter.

Target Corp. added 7 percent to $60.49. The retailer posted fourth-quarter profit that topped analysts’ estimates, signaling that it’s regaining customer loyalty after a data breach affected tens of millions of shoppers at the peak of the holiday season.

Aeropostale Inc., the teen apparel retailer under pressure from an activist investor to sell itself, increased 7.1 percent to $7.43. The company is working with Barclays Plc to explore options such as the sale of a convertible note or preferred stock to a private-equity firm, people with knowledge of the matter said.

Homebuilders climbed, with all 11 members of the S&P Supercomposite Homebuilding Index advancing. Lennar added 3.6 percent to $43.78 and PulteGroup rose 2.8 percent to $21.25.

Cablevision Systems Corp. jumped 3.9 percent to $17.26 as fourth-quarter revenue topped analysts’ estimates and its operating cash flow for the period grew 49 percent.

Have a wonderful evening everyone.

Be magnificent!

All things are linked together through cause and effect.  There is no such thing as an accident.

When we cannot find the link between cause and effect in an event, we call it an accident.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Everything in moderation, including moderation.

-Julia Child, 1912-2004.

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