February 3, 2015 Newsletter

Dear Friends,

Tangents:

Carolann is out of the office, I will be writing the newsletter on her behalf.

PHOTOS OF THE DAY

A decorated elephant marches during Navam Perahera, a Buddhist pageant of elephants, dancers and drummers, in Colombo, Sri Lanka, Tuesday. More than 50 elephants participated in the parade. Dinuka Liyanawatte/Reuters

Seagulls fly near a beach at the Baltic Sea town of Karlshagen, eastern Germany, Tuesday. Stefan Sauer/dpa/AP

Market Closes for February 3rd, 2015    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose a fourth day, extending a two-month high, as oil surged into a bull market amid speculation reduced investment will curb a production supply glut.

     Canadian Oil Sands Ltd. surged 20 percent, extending a record rally as energy shares jumped to the highest level since November. Royal Bank of Canada and Toronto-Dominion Bank, the nation’s largest lenders, climbed at least 2.6 percent to pace gains in financial shares. Teck Resources Ltd. added 7.4 percent as copper advanced the most in more than 21 months.

     The Standard & Poor’s/TSX Composite Index rose 162.30 points, or 1.1 percent, to 15,062.77 at 4 p.m. in Toronto, the highest level since Nov. 25. The benchmark equity gauge has jumped 3.2 percent in the past four days.

     “People are thinking the $40s was a little oversold on oil so now you’re seeing more stabilizing,” said Greg Taylor, fund manager at Aurion Capital Management Inc. in Toronto. His firm manages about C$6 billion ($4.84 billion). “If we can hold in the $50s that will go a long way to adding a lot of support to the energy sector and also the entire Canadian stock market with the banks doing a little better.”

     West Texas Intermediate crude rallied 7 percent to close at $53.05 a barrel in New York. WTI is up 19 percent from its Jan. 28 close of $44.45 a barrel. Brent crude entered a bull market after settling at $57.91 a barrel, more than 20 percent above its Jan. 13 settlement.

     Oil prices are getting a lift as producers cut back on their production and capital investments, lessening a supply glut that drove prices into a bear market last year. Chevron Corp. and Royal Dutch Shell Plc lowered their spending targets for this year as the industry cut more than $40 billion from budgets. BP Plc said Tuesday it will cut spending by 13 percent after oil slumped.

     Prices are still down 50 percent since June. The next few days will be crucial in determining whether the current rally will be short-lived, Taylor said.

     Five of the 10 main groups in the S&P/TSX advanced today, with energy shares surging 3.3 percent to lead gains. Financial shares, the biggest industry by weighting, rallied 2.1 percent. Trading volume was 41 percent higher than the 30-day average.

     Canadian Oil Sands surged 20 percent for a third straight advance that has lifted the oil and gas producer’s shares by 75 percent. Pacific Rubiales Energy Corp. climbed 29 percent and Lightstream Resources Ltd. jumped 31 percent.

     “It appears the market was a bit too negative and oversold,” said Irwin Michael, fund manager at ABC Funds in Toronto. His firm manages about C$600 million. “You do want to see some stability. Things can change very quickly.”

     First Quantum Minerals Ltd. soared 6.8 percent and Capstone Mining Corp. increased 16 percent as copper rose the most in 21 months on speculation more stimulus in China will boost demand for the metal. Aluminum had the biggest three-session gain in 15 weeks. Teck Resources, Canada’s largest diversified miner, climbed 7.4 percent.

     Royal Bank jumped 2.6 percent after the Wall Street Journal reported the bank has closed many of its wealth-management offices across Latin America in the past 18 months due to scrutiny of potential money-laundering activities.

     Bank of Montreal rallied 2.4 percent, the biggest increase since November 2011.

     Canaccord Genuity Group Inc., the investment services company, soared 10 percent, the most in a year, after reducing its workforce by 4 percent Monday.

US

By Oliver Renick and Joseph Ciolli

     (Bloomberg) — U.S. stocks rallied for a second day, rebounding from the biggest monthly drop in a year for the Standard & Poor’s 500 Index, as a surge in energy stocks spread to the broader market.

     Exxon Mobil Corp. and Chevron Corp. climbed at least 3 percent as Brent crude entered a bull market. Freeport-McMoRan Inc. rose 8.8 percent as commodities had the biggest three-day advance since 2012. General Motors Co. and Ford Motor Co. jumped after sales exceeded analysts’ estimates as cheaper gas and falling unemployment boosted consumer confidence.

     The S&P 500 added 1.4 percent to 2,050.03 at 4 p.m. in New York, climbing above its average level for the past 50 days. The Dow Jones Industrial Average rose 305.36 points, or 1.8 percent, to 17,666.40. The gauge is up 2.9 percent over two days, the most since Jan. 8.

     “The fact that oil is stabilizing takes some edge off the argument that the global economy is really in trouble,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “The markets are a little oversold after being down in January, which is also part of the strength today.”

     The S&P 500 rebounded 1.3 percent Monday, and the two-day rally has trimmed the gauge’s decline for the year to 0.4 percent. The index lost 3.1 percent in January, the worst performance in a year, as concern mounted that slowing growth overseas will hurt the American economy at the same time that the plunge in crude and the stronger dollar have shown signs of eroding corporate profits.

     Brent crude closed more than 20 percent above its Jan. 13 settlement, a common definition of a bull market, on speculation that reduced investment will curb crude production. Crude prices are still down 50 percent since June.

     Energy shares in the S&P 500 are up 6.8 percent over the past four sessions, the most since December, and the group is now up 0.7 percent for the year. The industry tumbled 20 percent from a June high through the end of the year as crude entered a bear market.

     Denbury Resources Inc. soared 11 percent, following a 12 percent rally on Monday. Oil and gas explorer EOG Resources Inc. rose 4.1 percent, and energy services company Schlumberger Ltd. added 2.9 percent.

     Caterpillar Inc. climbed 3.8 percent, its best gain since Nov. 21 and the biggest advance in the Dow. The company fell 6.6 percent last week after the company blamed lower oil prices in cutting its 2015 profit outlook.

     U.S. equities followed European stocks higher earlier in the day after Greece retreated from a plan to ask the euro area to write down debt. That eased concern that the nation would defy its creditors.

     “The biggest concern has been Greece and what will happen there and that’s being taken off the table in the short term,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. “The past few days seems rotational, people are trying to catch a bounce by moving into energy stocks and selling winners like biotech and health care to create cash.”

     All 10 groups in the S&P 500 advanced, led by energy shares. Phone, raw-materials, consumer-discretionary and financial companies rallied more than 1.6 percent.

     The Chicago Board Options Exchange Volatility Index fell 11 percent to 17.33. The gauge, known as the VIX, is down 17 percent in the past two sessions after a 26 percent jump last week.

     The Dow Jones Transportation Index climbed 1.5 percent, as railroads Norfolk Southern Corp., CSX Corp. and Union Pacific Corp. jumped more than 2.3 percent. Those gains offset declines in airlines, which fell amid the prospect of rising fuel costs.

     Banks rallied, with Bank of America Corp., Citigroup Inc.

and JPMorgan Chase & Co. each rising at least 2.3 percent. The worst-performing stock in the KBW Bank Index, Huntington Bancshares Inc., still rose 1 percent.

     KB Home, Toll Brothers Inc. and PulteGroup Inc. carried the homebuilders higher, each rising at least 2.6 percent.

     Office Depot Inc. jumped 22 percent after the Wall Street Journal reported the company is in advanced merger talks with Staples Inc. Staples added 11 percent.

     Eaton Corp., a maker of circuit breakers and large truck transmissions, soared 8.4 percent, the most since 2009, after reporting earnings that beat analysts’ estimates on strong U.S. housing demand and truck sales.

     Ford Motor and General Motors climbed after January data showed the two led automakers with the biggest U.S. sales. GM rose 2.6 percent after an 18 percent sales increase, and Ford added 2.5 percent as it reported a 16 percent gain in light- vehicle sales.

     Arch Coal Inc. added 16 percent after reporting a narrower fourth-quarter loss compared to a year ago after raising output at lower-cost mines. The company also suspended its 1-cent quarterly dividend to preserve liquidity, Chief Financial Officer John T. Drexler said in a statement.

     The Nasdaq Biotechnology Index lost 0.5 percent for the third straight loss. The index is down 2.9 percent from an all- time high on Jan. 26.

     Luminex Corp. fell 13 percent drop after the company predicted first-quarter and yearly revenue below analysts’ estimates. Isis Pharmaceuticals Inc. declined 5.8 percent after Deutsche Bank analyst Alethia Young said the company’s diabetes data don’t appear as strong as similar drugs.

Have a wonderful evening everyone.

Be magnificent!

“Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment.” Buddha

As ever,

Karen

“The starting point of all achievement is desire.” Napoleon Hill

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