February 27, 2024, Newsletter

Dear Friends,

Tangents:
February 27,1932: The neutron is discovered.  English physicist James Chadwick was later awarded the Nobel Prize for his discovery.
February 27, 1997: Legislation banning most handguns in Britain went into effect.  Go to article >>

Henry W. Longfellow, b.1807
Rudolph Steiner, philosopher, b.1861.
Joanne Woodward, actress, b. 1930
Elizabeth Taylor, actress, b.1932
Ralph Nader, b.1934.

Mexico City could be just months away from running out of drinking water
Record droughts have been draining Mexico City’s aquifers faster than they can be replenished, placing the city at risk of severe water shortages. Read More.

‘Finally, we have the evidence’: James Webb telescope spots neutron star hiding in wreckage of famous 1987 supernova
A neutron star spotted by the James Webb Space Telescope stayed hidden for 37 years while lurking in the wreckage of a stellar explosion, Supernova 1987A. Read More.

1st US spacecraft on moon in 50 years tipped over and face-planted near a crater
Despite tipping over, Intuitive Machines’ Odysseus spacecraft has still completed the key tasks of its mission.
Full Story: Live Science (2/26)

Owner of real ‘Saltburn’ house inundated with visitors
A TikToker recently showed viewers where to find the real house featured in the hit movie “Saltburn.” Now, the property owner said he’s been forced to hire extra security as crowds of people are showing up.

PHOTOS OF THE DAY

London, UK
Self-portrait at the Crossroads Between the Arts of Music and Painting, by Angelica Kauffman, 1794. A new exhibition at the Royal Academy in London explores the Swiss painter’s life and work
Photograph: Guy Bell/Rex/Shutterstock

Suqian, China
Hongze Lake is the fifth-largest freshwater lake in China, and a scenic spot in Jiangsu province
Photograph: Costfoto/NurPhoto/Rex/Shutterstock

​​​​​​​Barcelona, Spain
People play a video game with virtual reality headsets at the Mobile World Congress
Photograph: Bruna Casas/Reuters

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1891, David Sarnoff, future president of Radio Corp. of America and the greatest visionary of the radio and television industries, was born in Uzlian, Russia.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite declined slightly to 21,318.90 in Toronto.
Bank of Montreal contributed the most to the index decline, decreasing 3.6%.
Africa Oil Corp. had the largest drop, falling 8.3%.
Today, 73 of 225 shares fell, while 143 rose; 4 of 11 sectors were lower, led by financials stocks.
Insights
* This month, the index rose 1.4%
* The index advanced 5.2% in the past 52 weeks. The MSCI AC Americas Index gained 27% in the same period
* The S&P/TSX Composite is 0.6% below its 52-week high on Feb. 26, 2024 and 14.1% above its low on Oct. 27, 2023
* The S&P/TSX Composite is up 0.5% in the past 5 days and rose 0.9% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 16.6 on a trailing basis and 17.1 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.1% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.38t
* 30-day price volatility fell to 12.27% compared with 12.40% in the previous session and the average of 10.18% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | -24.2145| -0.4| 16/10
Industrials | -6.6525| -0.2| 15/11
Information Technology | -5.6194| -0.3| 7/3
Materials | -2.5819| -0.1| 27/22
Real Estate | 0.2991| 0.1| 10/8
Utilities | 0.8597| 0.1| 11/4
Health Care | 1.2522| 1.9| 4/0
Consumer Staples | 2.7296| 0.3| 8/3
Communication Services | 3.4707| 0.5| 5/0
Consumer Discretionary | 4.5278| 0.6| 10/3
Energy | 20.4942| 0.6| 30/9
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
Bank of Montreal | -22.7800| -3.6| 135.9| -6.7
RBC | -10.7900| -0.8| 6.2| -2.1
Shopify | -9.3530| -1.1| -32.6| 0.5
Magna Intl | 3.8170| 2.9| 114.6| -5.4
Brookfield Corp | 7.3980| 1.3| 75.8| 5.0
Bank of Nova Scotia| 17.1100| 3.2| 241.5| 2.2
US
By Rita Nazareth
(Bloomberg) — Wall Street saw another busy session of bond sales as issuers looked to borrow before key economic data later this week.
Treasuries were mixed after a $42 billion auction of seven-year notes and a heavy slate of new corporate debt.
Seven more issuers came forward to sell US investment-grade bonds, building off Monday’s surge that saw the most deals in a single day so far this year.
Investors are contending with an erosion in expectations for how much the Federal Reserve will lower rates and an onslaught of new corporate issuance that has given yield-seeking investors ample alternatives.
Traders no longer expect the Fed to cut rates by more than 75 basis points in 2024, bringing their view in line with what policymakers have indicated as the likeliest outcome.
“We continue to recommend investors act soon to lock in currently attractive bond yields,” said Solita Marcelli at UBS Global Wealth Management. “We particularly like the five-year duration segment of quality bonds, as this part of the yield curve offers the best combination of high yields, stability, and sensitivity to falling interest-rate expectations.”
Shorter-term Treasuries outperformed longer ones.
The S&P 500 edged higher.
Mega-caps were mixed, with Apple Inc. up and Nvidia Corp. down.
Macy’s Inc. climbed on plans to close almost a third of its namesake US locations.
Chevron Corp. and Hess Corp. slipped after Exxon Mobil Corp. said it’s considering a move that could break up the companies’ $53 billion merger and increase its share of Guyana’s giant offshore oil reserves.
Bitcoin hovered near $57,000.
Traders refrained from making big bets ahead of Thursday’s inflation data and a parade of central bank speakers.
Fed Governor Michelle Bowman repeated her expectation that inflation will continue to decline further with interest rates held at their current level — but said it’s too soon to begin rate cuts — joining a raft of officials stressing they’re in no rush to lower borrowing costs.
The personal consumption expenditures price index will likely validate that stance and possibly further diminish market expectations for a rate cut in the coming months.
“Because market expectations for a Fed cut this quarter have already reset, we don’t anticipate strong volatility resulting from this data print,” said Lauren Goodwin at New York Life Investments. “However, since market activity is likely to be heavily driven by interest-rate expectations for the foreseeable future, we are watching closely for any surprises.”
To Yung-Yu Ma at BMO Wealth Management, while the equity market seems due for a pause and a consolidation of its recent gains, key PCE inflation data could be the next short-term catalyst for the market, as investors are looking for additional data to help confirm if inflation is truly re-accelerating.
“This is a ‘teflon’ stock market, which has shown a remarkable ability to shake off bad news and focus on what is positive,” he noted. “Nothing bad has been able to stick to the markets for long – such as upside surprises in inflation data and delayed Fed rate cut expectations.”
Calm stock markets have dampened demand for hedges tied to the S&P 500.
The three-month 25-delta put skew – a measure of the price of put options relative to equivalent calls – dropped to its lowest level since 2006, underscoring the limited demand for hedging against declines, and the fear of missing out on further rallies.
Barclays Plc was the latest bank to ramp up its year-end target on the S&P 500 — following increases from Goldman Sachs Group Inc., UBS Group AG, and Piper Sandler & Co. Strategists led by Venu Krishna boost forecast on US equity benchmark to 5,300 from 4,800.
“The US economy continues to defy rates headwinds in 2024, much as mega​-​cap tech continues to defy even the most bullish earnings targets,” they wrote.
Indeed, the “Magnificent Seven” group of tech mega-caps saw its average earnings per share rise 55% in the fourth quarter compared to a year ago, according to data compiled by Bloomberg.
Most of that group has helped power the Nasdaq 100 to a record high and its fourth consecutive monthly gain.
S&P 500 companies are headed for their highest quarterly earnings beat rate since the fourth quarter of 2021, according to data compiled by Bloomberg Intelligence strategists Gina Martin Adams and Wendy Soong.
With more than 90% of S&P 500 companies having reported results, the gauge is on track for 7.7% year-on-year earnings per share growth, blowing past the pre-season forecast for 1.2%.
To Kristina Hooper at Invesco, there is a perception that the US stock market is trading at very lofty valuations.
While it is true that the S&P 500 is at an above-average price-to-earnings ratio, much of that is driven by just a few stocks, she noted.
“The good news is that this narrow group of stocks — dubbed the “Magnificent Seven” — have been meeting the high expectations set for them,” Hooper said. “Given their collective performance, valuations for the Magnificent Seven remain elevated compared to the broader US equity market, but their earnings growth is expected to be almost five times that of the remaining 493 stocks in the S&P 500 over the next years.”
“This isn’t ‘irrational exuberance’ — it’s more like ‘rational exuberance,’ she concluded.
Matt Maley at Miller Tabak has a word of caution.
He says that after the big run in equities, the market is showing signs of froth.
While that doesn’t mean stocks will roll over in a big way soon, it is a reason for investors to avoid being too complacent.
“The stock market could easily continue to advance,” Maley noted. “However, we believe that it’s important for investors to remain nimble and to have a plan in place — in advance — for what they will do if some sort of significant ‘surprise’ creates a big increase in volatility at some point in the coming months.”

Corporate Highlights:
* Viking Therapeutics Inc. more than doubled after results from a mid-stage trial suggested the biotech company may field a viable competitor to weight-loss drugs from Eli Lilly & Co. and Novo Nordisk A/S.
* Norwegian Cruise Line Holdings Ltd. climbed after issuing guidance ahead of expectations amid strong demand for its sailings.
* Warner Bros. Discovery Inc. ended its pursuit of a merger with rival Hollywood studio Paramount Global, CNBC reported, citing people familiar with the matter.
* Apple Inc. is canceling a decadelong effort to build an electric car, according to people with knowledge of the matter, abandoning one of the most ambitious projects in the history of the company.
* American Airlines Group Inc. is closing in on an order for about 100 narrowbody jets split between Airbus SE and Boeing Co., with the European plane-maker likely to secure the larger part of the commitment, according to people familiar with the talks.
* Capital One Financial Corp. predicted the time and expenses needed to fix Discover Financial Services’ regulatory challenges will be at the high end of what’s expected, or even beyond.
* ASM International NV projected revenue this quarter that fell far below market expectations, signaling that the Dutch chip-equipment maker is continuing to grapple with an uneven recovery in global demand for semiconductors.

Key Events This Week:
* Reserve Bank of New Zealand policy decision, Wednesday
* Eurozone economic confidence, consumer confidence, Wednesday
* US wholesale inventories, GDP, Wednesday
* Fed’s Raphael Bostic, Susan Collins and John Williams speak, Wednesday
* G-20 finance ministers and central bank chiefs meet in Sao Paulo, Wednesday through Thursday
* Germany CPI, unemployment, Thursday
* US consumer income, PCE deflator, initial jobless claims, Thursday
* Fed’s Austan Goolsbee, Raphael Bostic and Loretta Mester speak, Thursday
* China official PMI, Caixin manufacturing PMI, Friday
* Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday
* BOE chief economist Huw Pill speaks, Friday
* US construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday
* Fed’s Raphael Bostic and Mary Daly speak, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 rose 0.2% as of 4 p.m. New York time
* The Nasdaq 100 rose 0.2%
* The Dow Jones Industrial Average fell 0.2%
* The MSCI World index rose 0.2%
Currencies
* The Bloomberg Dollar Spot Index was little changed
* The euro was little changed at $1.0844
* The British pound was little changed at $1.2681
* The Japanese yen rose 0.1% to 150.51 per dollar
Cryptocurrencies
* Bitcoin rose 4.3% to $57,007.51
* Ether rose 2.2% to $3,254.49
Bonds
* The yield on 10-year Treasuries advanced three basis points to 4.31%
* Germany’s 10-year yield advanced two basis points to 2.46%
* Britain’s 10-year yield advanced three basis points to 4.20%
Commodities
* West Texas Intermediate crude rose 1.4% to $78.65 a barrel
* Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carly Wanna, Alexandra Semenova, Isabelle Lee, Carmen Reinicke and Elizabeth Stanton.
Have a lovely evening.

Be magnificent!
As ever,

Carolann
Some people look for a beautiful place.  Others make a place beautiful. –Inayat Khan, 1882-1927.

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
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com