February 4, 2014 Newsletter

Dear Friends,

Tangents:

Facebook turns 10 today.  It was February 4, 2004 that Mark Zuckerberg launched Facebook while still an undergrad at Harvard.

And…it was 50 years ago this month that the Beatles sparked Beatlemania  with their appearance on the Ed Sullivan Show.

To commemorate, CBS will host The Night That Changed America: A Grammy Salute to the Beatles on the anniversary night, February 9^th at 8 PM.  The Eurythmics, Annie Lennox and David Stewart, are reuniting to perform songs by the Fab Four.   Other artists paying tribute include Alicia Keys, John Legend, John Mayer, Keith Urban and Maroon 5.

Photos of the day

The Tungurahua volcano spews lava, seen from Huambalo, Ecuador. An orange alert was issued in response to the volcanic activity. Cris Toala Olivares/Reuters

A bicyclist crosses Douglas Avenue in downtown Wichita, Kan., during a heavy snowstorm. South-central Kansas is expecting up to seven inches of snow as a winter storm passes through. Travis Heying/The Wichita Eagle/AP

Market Closes for February 4^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Feb. 4 (Bloomberg) — Canadian stocks climbed, after a two- day slump sent the benchmark index to the lowest level of the year, as a rise in industrial stocks offset declines in financial and utilities shares.

BlackBerry Ltd. rose 5.6 percent after CIBC World Markets analysts said the company’s operating expenses may be lower than forecasts. WestJet Airlines Ltd. added 3.4 percent after boosting its dividend. Crew Energy Inc. climbed 6.7 percent as natural-gas prices jumped. Silver Standard Resources Inc. fell 1.9 percent after agreeing to buy a mine from Goldcorp Inc. and Barrick Gold Corp.

The Standard & Poor’s/TSX Composite Index rose 18.28 points, or 0.1 percent, to 13,504.48 at 4 p.m. in Toronto. The gauge has dropped 3.5 percent since closing Jan. 20 at 13,990.29, the highest level since April 2011. Trading in S&P/TSX stocks was 7.8 percent higher than the 30-day average at the close.

“There’s not much movement in any sector today,” Gareth Watson, vice president of investment management and research at Richardson GMP Ltd., which oversees C$28 billion ($25 billion), said by phone from Toronto. “It’s been a flat day relative to what you’re seeing in other markets. Our markets haven’t pulled back as much as the U.S., so you haven’t seen the same amount of movement today on our side of the border.”

About $2.9 trillion has been wiped from the value of equities worldwide this year, following the biggest rally in four years in 2013, as China’s growth slows, the Federal Reserve cuts stimulus and anti-government protests spread in emerging markets from Thailand to Ukraine.

The MSCI Emerging Markets Index retreated 1 percent today, extending this year’s slide to 8.5 percent. The Standard & Poor’s 500 Index climbed 0.8 percent after sinking 2.3 percent yesterday. European stocks fell 0.2 percent after earlier losses of as much as 0.8 percent.

Canadian equities have declined 0.9 percent since the beginning of the year, making it the seventh-best performer among 24 developed markets tracked by Bloomberg. Last year, the S&P/TSX rose 9.6 percent, the fourth-worst performance among developed markets, ahead of Austria, Hong Kong and Singapore.

Five of 10 main industries in the index advanced today.

Industrials climbed 0.9 percent and raw-material producers increased 0.5 percent. Energy shares rose 0.4 percent.

BlackBerry jumped 5.6 percent to C$10.64, ending a three- day losing streak of 9.4 percent. CIBC analyst Todd Coupland wrote that the smartphone maker sees itself becoming cash-flow positive by the fourth quarter of 2015. BlackBerry’s quarterly expenses may fall to $500 million from about $900 million, Coupland wrote.

WestJet surged 3.4 percent to C$25.70. The carrier raised its dividend for the fourth time in less than three years after reporting an 11 percent increase in fourth-quarter profit as it flew more passengers.

WestJet is also pressing ahead with a plan to cut C$100 million in expenses by the end of 2014, a year ahead of schedule, Gregg Saretsky, chief executive officer, said on a conference call with analysts.

Crew Energy increased 6.7 percent to C$7.37, the highest level since March, as the price of natural gas in Canada surged.

Silver Standard dropped 1.9 percent to C$8.39. The explorer of the precious metal will purchase the Marigold mine in Nevada for $275 million. Goldcorp rose 1.2 percent to C$27.82, while Barrick fell 1 percent to C$21.21.

Atlantic Power Corp. slipped 2.6 percent to C$2.62, bringing losses this week to 10 percent. Yesterday, Moody’s Investors Service downgraded the energy producer’s corporate family rating to B2 from B1, citing high leverage.

US

By Lu Wang

Feb. 4 (Bloomberg) — U.S. stocks advanced, with the Standard & Poor’s 500 Index rebounding from its biggest drop since June, as investors assessed corporate earnings and data showing factory orders fell less than estimated in December.

Yum! Brands Inc. climbed 8.9 percent after the fast-food retailer reported profit that beat estimates. Michael Kors Holdings Ltd. rallied 17 percent as the luxury-goods maker increased its profit and sales forecasts. Pfizer Inc. advanced 2.8 percent amid an analyst upgrade. J.C. Penney Co. plunged to the lowest level since 1980 after same-store sales rose less than analysts’ estimated.

The S&P 500 climbed 0.8 percent to 1,755.20 at 4 p.m. in New York. The Dow Jones Industrial Average added 72.44 points, or 0.5 percent, to 15,445.24. About 7.6 billion shares changed hands on U.S. exchanges, 21 percent above the three-month average.

“Main Street is still chugging along. Earnings have been fine,” Ethan Anderson, senior portfolio manager at Rehmann Financial in Grand Rapids, Michigan, said in a phone interview.  His firm oversees $1.5 billion. “You put all these together and I’m just not seeing anything that’s suggesting that the train is off the track. We’re pretty much in a very healthy pullback. To me, it’s refreshing.”

The S&P 500 sank 2.3 percent yesterday, as a manufacturing gauge retreated more than estimated, raising concern about the strength of growth in the world’s largest economy. The equities benchmark slipped 5.8 percent since its Jan. 15 record through yesterday, giving it the first drop of at least 5 percent since June. The Dow average plunged 326 points yesterday, bringing its retreat this year to 7.3 percent.

The Dow has risen 0.5 percent on average the day after a loss of more than 300 points during the bull market that began in March 2009, according to data from Bespoke Investment Group LLC. The average 5 percent decline in the S&P 500 during that time has lasted 25 days and extended to a drop of 8.2 percent, the data show.

The losses this year had wiped more than $1.2 trillion off U.S. share prices amid signs of slowing growth in China and as the Argentinian government’s decision to allow the peso to devalue triggered a rout in emerging-market currencies.      The Federal Reserve last week decided to press on with reductions in its monthly bond-buying program.

“The biggest concern for investors right now is, is this the beginning of a bigger pullback in the market?” Joseph Tanious, a global market strategist at JPMorgan Asset Management in New York, said by phone. His firm oversee $1.5 trillion in client assets. “If you look at economic growth, the earnings season and the health of corporate America, all those things appear to be doing quite well. Our advice to investors is to use the dip as the buying opportunity.”

Orders for factory goods in December fell 1.5 percent, less than the average economists’ estimate of a 1.8 percent decline in a Bloomberg survey, data from the Census Bureau showed today.

The U.S. will post the narrowest budget deficit this year as a share of the economy since 2007 as stronger growth helps boost tax revenue, according to the Congressional Budget Office.  The deficit will decline to $514 billion this fiscal year, or 3 percent of the economy, the office forecast.

Investors snapping up insurance against stock losses have pushed the cost of options to a record increase for the start of a year. The Chicago Board Options Exchange Volatility Index jumped 34 percent last month for the biggest January advance since it was created in 1990, according to data compiled by Bloomberg. The VIX plunged 11 percent today, the most since Dec. 18, to 18.65 after climbing 16 percent yesterday to a one-year high.

Fed policy makers said on Jan. 29 that the central bank will reduce its monthly bond purchases by $10 billion to $65 billion, cutting the pace of stimulus for a second straight meeting because of an improving economy.

Fed Bank of Richmond President Jeffrey Lacker said today that a decline in global stock markets probably won’t deter the Fed from further trimming bond purchases.

Three rounds of Fed bond buying have helped drive the S&P 500 up 159 percent from a 12-year low in 2009 while pushing capital into emerging markets in search of higher returns. The S&P 500 surged 30 percent last year, driving valuations to near the highest levels since 2009.

Some 25 companies on the S&P 500 report quarterly results today. Profit for the benchmark’s stocks probably increased by 8.3 percent in the fourth quarter of 2013 and revenue by 2.5 percent, analysts’ estimates compiled by Bloomberg show.

Nine out of 10 S&P 500 main industries advanced as consumer-discretionary, telephone and health-care shares jumped more than 1 percent to lead the rebound. Merck & Co. climbed 2.8 percent to $53.51 for the biggest increase in the Dow. The second-largest U.S. pharmaceuticals company is scheduled to announce earnings tomorrow.

Yum Brands rose 8.9 percent to $72.06. The owner of the KFC and Taco Bell fast-food chains posted profit excluding some items of 86 cents a share in the final three months of 2013, more than the 79-cent average analyst projection compiled by Bloomberg. Sales at restaurants open at least a year for its international unit, which includes France and Russia, climbed 2 percent in the period.

Michael Kors jumped 17 percent to a record $89.91. Annual earnings will probably reach as much as $3.09 a share, more than a November forecast for profit of $2.81 at most, according to a statement today. The company also boosted its full-year sales forecasts after customers in Europe and in North America bought more of its products, which include accessories, footwear, watches and jewelry.  Fossil Inc., the maker of the namesake watch brand, gained 6.1 percent to $114.57.

Pfizer climbed 2.8 percent to $31.44. The world’s largest drugmaker will likely announce more details on a new organizational structure and launch its breast cancer treatment, palbociclib, later this year, Jeffrey Holford, an analyst with Jefferies Group LLC, wrote in a note. He raised the stock’s rating to buy from hold.

McGraw Hill Financial Inc. rose 3.5 percent to $77.02, leading gains among financial companies. The parent of the Standard & Poor’s reported fourth-quarter profit that exceeded analysts’ estimates even as company bond sales slowed.

J.C. Penney slumped 11 percent to $5.08, the lowest level since December 1980. The department-store chain said sales at locations open at least a year rose 2 percent in the fiscal fourth quarter. That missed the average 4.1 percent gain projected by analysts in a Bloomberg survey.

Take-Two Interactive Software Inc., maker of the “Grand Theft Auto V” video game, tumbled 9.7 percent to $17.06. The company forecast profit would not exceed 10 cents a share this quarter, missing the average analyst projection of 13 cents.

Take-Two estimated revenue of $170 million to $200 million, also falling short of estimates.

Have a wonderful evening everyone.

Be magnificent!

You can live with few clothes or with one meal a day, but that is not simplicity.

So be simple, don’t live in a complicated way, contradictory and so on, just be simple inwardly.

Krishnamurti, 1895-1986

As ever,

Carolann

The two most powerful warriors are patience

and time.

-Leo Tolstoy, 1828-1910

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7