January 15, 2014 Newsletter

Dear Friends,

Tangents: Full moon tonight!  Don’t forget to gaze at the stars J.

Birthday: January 15^th, 1929, Martin Luther King Jr.

Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree. – Martin Luther King, quoting Martin Luther.

Photo of the day

An angler fishes on opening day of salmon season on the River Tay in Kenmore, Scotland. Russell Cheyne/Reuters

Market Closes for January 15^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 15 (Bloomberg) — Canadian stocks rose a second day, reaching a more than two-year high, as base metals producers rallied after the World Bank raised its global growth forecast and insurance companies led financial shares higher.

Sun Life Financial Inc. and Manulife Financial Corp. advanced at least 1.5 percent to pace gains among financial stocks. Copper Mountain Mining Corp. added 6.3 percent after reporting improved production in the fourth quarter. NuVista Energy Ltd. climbed 3.5 percent as crude prices advanced for a second day. DragonWave Inc., a network equipment maker, soared 26 percent after announcing a deal to sell its services into the Chinese market.

The Standard & Poor’s/TSX Composite Index rose 80.20 points, or 0.6 percent, to 13,772.58 at 4 p.m. in Toronto for the highest close since May 2011. The benchmark equity gauge has advanced 1.1 percent this year.

“We’ve seen some positivity in the markets the last couple of days, we’re trading in line with the U.S. today,” said Brian Huen, fund manager at Red Sky Capital Management Ltd. in Toronto. His firm manages about C$225 million ($205.6 million).

“The banks are a barometer for the market, when the banks do well the rest of the market does well. We’re positive on financials.”

Eight of 10 industries in the S&P/TSX advanced on trading volume 25 percent higher than the 30-day average. Financial stocks account for nearly 35 percent of the S&P/TSX, the largest single industry group by weighting, followed by energy at almost 25 percent.

Sun Life Financial rose 1.5 percent to C$38.20 and Manulife Financial increased 1.8 percent to C$21.96 to pace a 0.5 percent advance among financial stocks.

Toronto-Dominion Bank, Canada’s largest lender by assets, added 0.3 percent to C$97.60 and Royal Bank of Canada, the second-largest, gained 0.2 percent to C$71.06.

Materials producers rallied 1.7 percent, the most in the S&P/TSX. The group has gained on all but two of the 11 sessions this year.

Copper prices advanced in London on speculation that an improving global economy will increase demand, as the World Bank raised this year’s growth forecast to 3.2 percent from 3 percent. Nickel also advanced.

Copper Mountain Mining jumped 6.3 percent to C$1.68. The company said output of copper, gold and silver last quarter was the most since the mine began operations.

Lundin Mining Corp. rose 4.3 percent to C$4.91 and First Quantum Minerals Ltd. increased 4.2 percent to C$19.40 as the price of copper erased earlier losses in London.

Thompson Creek Metals Co. climbed 12 percent to C$3.16. The stock has rallied 33 percent in the past two sessions, the biggest two-day advance since September 2006, after Bank of America raised its rating on the stock to buy from underperform.

NuVista Energy advanced 3.5 percent to C$7.47 and Bankers Petroleum Ltd. rose 1.4 percent to C$4.51. Crude for February delivery advanced 1.7 percent in New York to settle at $94.17 a barrel after the U.S. Energy Information Administration said stockpiles decreased more than five times as much as forecast.

DragonWave surged 26 percent to C$1.95, the biggest increase since April. The Ottawa-based company has signed a strategic sales agreement with China’s Xi’an Potevio Communications, focused on sales and distribution in China.

Potash Corp. of Saskatchewan Inc. climbed 2.5 percent to C$38.46 for the highest close since July, after a report from researcher Fertecon Ltd. said producer OAO Uralkali is seeking to raise prices for the potash fertilizer in Brazil and China to $350 a ton.

USA

By Lu Wang and Callie Bost

Jan. 15 (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index erasing a loss for 2014 to close at a record, as the World Bank lifted its global growth forecast and Bank of America Corp.’s profit spurred a rally in financial shares.

Bank of America jumped 2.3 percent after the second-biggest U.S. lender reported fourth-quarter earnings and revenue that beat analysts’ estimates. Apple Inc. gained 2 percent after China Mobile Ltd. said pre-orders for iPhones had reached 1 million. Regeneron Pharmaceuticals Inc. declined 4.3 percent amid an analyst downgrade.

The S&P 500 added 0.5 percent to 1,848.38 at 4 p.m. in New York, surpassing its previous record of 1,848.36 from Dec. 31.

The Dow Jones Industrial Average gained 108.08 points, or 0.7 percent, to 16,481.94. About 6.8 billion shares changed hands on U.S. exchanges, 12 percent above the 30-day average.

“It’s a true, cyclical, macro upswing that’s broad- based,” Jerry Braakman, chief investment officer of First American Trust in Santa Ana, California, said in a phone interview. His firm manages $1.1 billion. “People who have reported have posted really solid numbers, specifically yesterday’s JPMorgan and today with BofA. Just tells us that when the banks are doing well, the economy is going well.”

The benchmark for U.S. equities is little changed in 2014 after declining as much as 1.6 percent. The gauge gained 1.1 percent yesterday, the most since Dec. 18, as better-than- forecast retail sales and corporate merger activity signaled confidence in the economy.

The index rallied 30 percent last year, sending the gauge to a record and its highest valuation since the end of 2009. The S&P 500 trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.

Shares in shipping stocks and companies with smaller market capitalizations, considered most closely tied to economic swings, hit records today. The Russell 2000 Index of small stocks increased 0.7 percent to an all-time high while the Dow Jones Transportation Average added 0.6 percent to a record.

“When most of the averages are making new highs together, that shows that the overall market is in a pretty good shape,”  Jim Welsh, a market strategist who helps oversee $5.7 billion at Forward Management LLC in San Francisco, said in a phone interview. “The odds favor that there will be nother rally to one more new high by the end of the first quarter.”

The World Bank raised its global growth forecasts as a recovery in advanced economies tempers the effects of tighter monetary conditions on developing markets. The forecast for the richest nations was raised to 2.2 percent from 2 percent. Part of the increase reflects improvement in the 18-country euro area, with the U.S. ahead of developed peers, growing twice as fast as Japan.

International Monetary Fund Managing Director Christine Lagarde said today that momentum in the world economy seen in the second half of last year should continue in 2014. The Washington-based fund plans to raise its forecast for global growth when it releases a report later this month.

Data today indicated that manufacturing in New York, northern New Jersey and southern Connecticut grew at a faster pace this month. The Federal Reserve Bank of NewYork’s general economic index surged to 12.5, topping the 3.5 estimate in a Bloomberg survey. Positive readings mean that activity expanded.

A separate report showed wholesale prices in the U.S. climbed in December for the first time in three months to cap the smallest annual increase in five years.

Investors are watching economic data for signals on the pace of Federal Reserve stimulus cuts. Three rounds of monetary stimulus from the central bank have helped push the S&P 500 higher by 173 percent from a 12-year low in 2009.

The Fed said ‘‘moderate’’ growth across most of the country last month was buoyed by gains in holiday spending by consumers, an improving labor market and strength in manufacturing.

“The economic outlook is positive in most districts, with some reports citing expectations of ‘more of the same’ and some expecting a pickup in growth,” the Fed said today in its Beige Book business survey, based on reports gathered on or before Jan. 6.

The officials decided at their December meeting to reduce their monthly bond buying by $10 billion to $75 billion. They cited the improving labor market.

Bank of America and Fastenal Co. are among companies reporting financial results today. Fourteen members of the S&P 500, including Goldman Sachs Group Inc. and Citigroup Inc., release earnings tomorrow.

Profit per share for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analysts surveyed by Bloomberg.

“Expectations are not really high for earnings season,”  Richard Sichel, chief investment officer at Philadelphia Trust Co., said in a telephone interview. He helps oversee $1.9 billion. “The main thing that each quarter needs is top line growth. Companies can only go for so long squeezing earnings out of the bottom line. We need to some improvement in growth.”

The Chicago Board Options Exchange Volatility Index was unchanged today at 12.28. The gauge of S&P 500 options known as the VIX is down 11 percent this year.

Seven out of 10 industry groups in the S&P 500 advanced as telephone, technology and financial companies climbed more than 1.1 percent to lead the gains. Microsoft Corp. surged 2.7 percent to $36.76 and Verizon Communications Inc. gained 2.5 percent to $48.27 among the biggest advances in the Dow.

Bank of America climbed 2.3 percent to $17.15, the highest since May 2010. The lender’s profit more than quadrupled as the company quelled claims tied to defective mortgages.

Wells Fargo & Co., the largest U.S. home lender that yesterday reported record quarterly profit, rose 1.8 percent to an all-time high of $46.40. JPMorgan Chase & Co., whose earnings beat analysts’ estimates this week, rallied 3 percent to $59.49, the highest level since April 2000.

Technology companies in the S&P 500 rallied 1.2 percent as a group and the Nasdaq-100 Index rose 0.8 percent to the highest level since September 2000.

Apple climbed 2 percent to $557.36. China Mobile, the world’s largest phone company by users, said pre-orders for the iPhone have reached about 1 million units ahead of sales in the carrier’s outlets that start at the end of this week.

Data-storage companies rallied after Datalink Corp.’s quarterly earnings and sales surpassed its expectations.

Datalink surged 38 percent to $14.96, the highest since August 2000. NetApp Inc. jumped 8.3 percent to $43.51 for the best performance in the S&P 500 and Teradata Corp. climbed 4 percent to $47.63.

Tesla Motors Inc. advanced 1.8 percent to $164.13, the highest since November. Elon Musk predicted that the company will deliver its first Model S vehicles to China in March. The electric-car maker surged 16 percent yesterday after saying it delivered 6,900 Model S cars in the fourth quarter, pushing its full-year sales beyond a company target.

Aeropostale Inc. added 0.7 percent to $7.78 after earlier rising as much as 6.2 percent. The teen-clothing retailer has contacted at least two private-equity firms as management explores strategic options, people with knowledge of the matter said.

General Motors Co. declined 1.6 percent to $39.38. The carmaker forecast 2014 profit to “modestly” improve as it introduces 15 new or refreshed vehicles in the U.S. The company yesterday announced a dividend of 30 cents a share, the first payout since 2008.

GM also named Chuck Stevens as its new chief financial officer. Mary Barra, who had been the company’s product chief, today becomes the first female chief executive officer of a global automaker, succeeding Dan Akerson, who is retiring.

Regeneron dropped 4.3 percent to $287.49. Jim Birchenough, an analyst with BMO Capital Markets Corp., cut the stock’s rating to market perform, an equivalent of neutral, from outperform, saying the market opportunity of the eye drug Eylea, the company’s top-selling product, is fairly valued.

Fastenal lost 4.5 percent to $46.06 for the biggest decline in the S&P 500. The seller of industrial and construction supplies reported profit and revenue that fell short of analysts’ forecasts.

Have a wonderful evening everyone.

Be magnificent!

Strength does not come from physical capacity.  It comes from an indomitable will.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Experience teaches only the teachable.

-Aldous Huxley, 1894-1963.

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