January 21, 2016 Newsletter

Dear Friends,

Tangents:

Supernova Has Energy of Hundreds of Billions of Suns

By SINDYA N. BHANOO, NY TimesAn artist’s impression of the supernova ASASSN- 15lh as it would appear from an exoplanet about 10,000 light-years away. CreditWayne Rosing

Astronomers have discovered a giant ball of hot gas, billions of light years away, that is radiating the energy of hundreds of billions of suns. The ball may be the most powerful supernova ever seen, a study in the journal Science reports. At the center is an object about 10 miles in diameter that scientists think might be a rare type of star called a magnetar. The gas ball, 3.8 billion light years away, was spotted through the All Sky Automated Survey for Supernovae collaboration. The project, led by researchers atOhio State University, aims to find supernovae using various small telescopes in the Northern and Southern Hemispheres.

PHOTOS OF THE DAYA skier makes his way through a snowy winter landscape on the 1456-meter-high Grosser Arber mountain near Bayerisch Eisenstein, southern Germany, Thursday. Armin Weigel/dpa/AP

A crocodile swims in a privately-owned pool in Islamorada, Fla., Thursday. The Florida Fish and Wildlife Conservation Commission assisted in the removal of the crocodile. Lieutenant David Carey/Monroe County Sheriff’s Office/AP

Market Closes for January 21st, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Anna-Louise Jackson

     (Bloomberg) — Energy shares led Canadian stocks higher to their biggest gain of 2016, as comments by Mario Draghi fueled speculation that the European Central Bank may bolster its stimulus programs as early as March.

     The S&P/TSX jumped 1.6 percent to close at 12,035.86 at 4:00 p.m. in Toronto. The index rallied the most since Dec. 16 as energy companies posted the biggest gains among the 10 main industries, followed by utilities and consumer-staples stocks. The benchmark gauge, which entered a bear market two weeks ago, touched yesterday its lowest level since August 2012. It’s down about 7.5 percent year-to-date.

     Global equities rebounded after $1.1 trillion was wiped from the value of stocks yesterday as investor sought reassurance from Draghi that downside risks to the euro-area economy have increased since the year began. The central bank kept interest rates unchanged at record lows. That followed a decision Wednesday from Bank of Canada policy makers, who kept their benchmark interest rate unchanged, saying stronger U.S. demand, a weaker currency and two rate cuts last year are leading the economy out of an oil slump.

     Canada’s currency strengthened for a second straight day against its U.S. peer following 13 days of weakening.

     Energy companies surged 5.4 percent, the most since August, after four days of declines. Baytex Energy Corp. jumped almost 24 percent, its biggest gain ever. Paramount Resources Ltd. soared 28 percent before trading halted temporarily and the stock closed 15 percent higher. Similarly, Penn West Petroleum Ltd. rose 14 percent after its chief financial officer said at a conference the company expects additional asset sales this year.

     Utilities stocks advanced 2.2 percent, led by a 5.9 percent gain for Transalta Corp. Shares of consumer-staples jumped 2.1 percent, with Alimentation Couche-Tard Inc. and George Weston Ltd. both adding at least 2.9 percent.

     Raw-materials companies slumped as much as 2.5 percent, briefly touching levels last seen in 2005, before paring the losses to close 0.8 percent lower. Industrials stocks fell for a third straight day as Bombardier Inc. tumbled 9.2 percent to the lowest since April 1991 after United Continental Holdings Inc. said it would buy Boeing Co.’s smallest jetliners, snubbing Bombardier’s C Series.

     Canadian Pacific Railway Ltd., which is attempting to acquire Norfolk Southern Corp., sank as much as 7.4 percent after reporting fourth-quarter earnings that missed analyst estimates as revenue fell amid declines in cargo including crude, metals and minerals. The stock closed down 0.9 percent.

US

By Dani Burger

     (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index recovering from a 21-month low, as energy shares rallied with oil and the European Central Bank signaled the potential for more stimulus measures amid uncertain prospects for global growth.

     Chevron Corp. climbed 2.6 percent and Home Depot Inc. surged 3.3 percent as energy and consumer discretionary companies paced the rebound from yesterday’s selloff. Verizon Communications Inc. gained 3.3 percent after its profit beat estimates. Banks in the S&P 500 slumped, with Bank of America Corp. falling 2.4 percent. Union Pacific Corp. lost 3.6 percent after its earnings missed forecasts.

     The S&P 500 rose 0.5 percent to 1,868.99 at 4 p.m. in New York, trimming an earlier 1.6 percent climb in a rebound from the lowest level since April 2014. The Dow Jones Industrial Average gained 115.94 points, or 0.7 percent, to 15,882.68. The Nasdaq Composite Index was little changed after rising as much as 1.5 percent, hampered in part by Netflix Inc.’s 5 percent retreat. About 9.9 billion shares traded hands on U.S. exchanges, 32 percent above the three-month average.

     “It’s good to see a reversal, to know that there are still buyers out there when things are oversold,” said Aaron Jett, vice president of global equity research at Los Angeles-based Bel Air Investment Advisors LLC. “It’s a jittery market, especially in oil. I find it difficult for people to invest long with a lot of confidence right now because there is a lot of pressure to the downside. We’re speaking with clients quite frequently — there’s a lot of nervousness out there.”

     Equities alternated for a seventh day between gains and losses amid the S&P 500’s worst start to a year since 2008. Sentiment has been weighed by concerns that the slide in crude oil and weakness in China will drag down global growth, offset by occasional bouts of optimism that policy makers will act to help stem the rout. Calling the country’s market “not yet mature,” China’s Vice President Li Yuanchao said today the government would boost regulation in an effort to avoid too much volatility.                        

     European Central Bank President Mario Draghi said during a press conference Thursday that downside risks to the euro-area economy have increased since the year began, and the central bank may need to bolster its stimulus programs as soon as March amid rising concerns about the recovery. The bank kept interest rates unchanged.

     Thursday’s rebound brought a respite for investors from Japan to Germany and Brazil who have watched their stock markets tumble into bear territory. The S&P 500 has fallen 8.6 percent year to date, and is down about 12 percent from a record set in May. The gauge is on track for its fourth straight weekly decline, which would be the longest streak since October 2014.

     Investment managers are warning that the benchmark could drop another 10 percent and oil could fall as low as $20 a barrel. Jeffrey Rottinghaus, whose T. Rowe Price mutual fund beat 99 percent of rivals over the past year, also said the U.S. economy may slip into a mild recession.

     “I think people are starting to believe that while we may not be at an absolute bottom, we may be close,” said Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. “Oil has been a very strong theme, though I think certainly in months that are heavy in central bank decisions that central bank activity has to a degree overwhelmed oil.”                         

     Investors are keeping close watch on progress in the economy to gauge the trajectory of U.S. interest rates before the Federal Reserve’s meeting next week. Data today showed the number of applications for unemployment benefits unexpectedly increased last week to a six-month high, indicating tempered progress in the labor market.  

     Expectations for a rate hike at the Fed’s January meeting have been low since December’s increase in borrowing costs. Now, those for March are falling too, with traders trimming the chances to 20 percent, from even odds at the end of last year.

     Corporate earnings may also offer cues on the strength of the U.S. economy, with the few companies that have reported so far mostly exceeding estimates. General Electric Co. is scheduled to report results on Friday. Analysts predict profits for S&P 500 members slumped 7 percent in the final three months of 2015, while sales fell 3.1 percent.

     The Chicago Board Options Exchange Volatility Index fell 3.3 percent Thursday to 26.69. The measure of market turbulence known as the VIX has surged about 47 percent so far in 2016, and is on track for its biggest climb since a record-setting jump in August.

     Seven of the S&P 500’s 10 main industries climbed, with energy and phone companies rising more than 2.4 percent. Consumer discretionary shares added 1.4 percent. Health-care and financial shares slipped, while utilities were little changed.

     The energy group reversed Wednesday’s 2.9 percent drop as crude rallied more than 4.2 percent. Devon Energy Corp. jumped 12 percent after sliding 8 percent yesterday. Kinder Morgan Inc. soared 16 percent after saying it will reduce full-year 2016 capital outlays by $900 million to cope with the collapse in commodities markets.

     CBS Corp. climbed 4 percent to lead gains among consumer discretionary shares. Home Depot had its best increase in two months after the home-improvement retailer fell as much as 5.2 percent Wednesday, briefly reaching a three-month low.

     Google parent Alphabet Inc. rose 1.1 percent to help boost technology companies. Semiconductor and equipment companies in the benchmark increased 1.2 percent. Xilinx Inc. rallied 8.6 percent after it amended contracts with five top executives to provide benefits in case of a change in control. Micron Technology Inc. climbed 8 percent, rising for just the second time in 11 sessions.

     Banks in the benchmark slid 0.9 percent, reversing a rally of as much as 1.6 percent. Bank of America slumped for a fourth day, extending its decline to nearly 11 percent over the period. Fifth Third Bancorp fell 4.8 percent to its lowest since 2013, even as its fourth-quarter profit exceeded analysts’ estimates.

     Health-care companies retraced Wednesday’s late-day gains, led by biotechnology companies. Alexion Pharmaceuticals Inc. and Biogen Inc. lost 2.7 percent. In more back-and-forth action, the Nasdaq Biotechnology Index sank 2.2 percent after rising 2.7 percent yesterday.

Have a wonderful evening everyone.

Be magnificent!

Sensibility is the capacity to feel,

recognize, and distinguish the most tiny and subtle changes.

Swami Prajnanpad

As ever,

Carolann

Either I will find a way, or I will make one.

                    -Philip Sidney, 1554-1586

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7