January 29, 2014 Newsletter

Dear Friends,

Tangents:

On this day in 1963, the poet Robert Frost died in Boston.    In honor of him:

The Secret Sits

Robert Frost

We dance round in a ring and suppose,

But the Secret sits in the middle and knows.

Devotion

Robert Frost

The heart can think of no devotion

Greater than being shore to the ocean-

Holding the curve of one position,

Counting an endless repetition.

Photos of the day

Fireworks explode over the Singapore skyline during Chinese New Year celebrations. The Lunar New Year, which falls on January 31, marks the year of the horse. Edgar Su/Reuters

Two hikers walk past snow-covered trees in the Thuringian Forest near Masserberg, central Germany. Martin Schutt/dap/AP

Market Closes for January 29^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Jan. 29 (Bloomberg) — Canadian stocks declined following disappointing corporate earnings, as investors weighed the U.S. Federal Reserve’s decision to reduce stimulus amid turmoil in emerging markets.

CGI Group Inc. plunged 5 percent after first-quarter earnings missed estimates. AGF Management Ltd. slumped 6.3 percent as quarterly profit trailed forecasts. Air Canada dropped 6 percent, extending its slide to a fifth day. Detour Gold Corp. paced gains among miners as gold and silver prices gained amid a rout in emerging-market currencies that spurred demand for the precious metals.

The Standard & Poor’s/TSX Composite Index decreased 44.56 points, or 0.3 percent, to 13,643.10 at 4 p.m. in Toronto. The slump trimmed the gauge’s advance this year to 0.2 percent.

Trading in S&P/TSX stocks was 12 percent higher than the 30-day average.

“There seems to be mixed signals in how investors should react to emerging markets and violent currency movements,” Barry Schwartz, a fund manager with Baskin Financial Services Inc., said in a phone interview from Toronto. His firm manages C$600 million ($538.1 million). “There’s a debate to whether the Fed will taper or not taper. None of the economic data is concerning, so our feeling is once again, stocks should react to earnings.”

The Fed today announced plans to press on with another $10 billion reduction in monthly bond purchases intended to speed a recovery from the worst recession since the Great Depression.

A Bloomberg gauge tracking 20 emerging-market currencies fell to the lowest since April 2009 today even as central banks from South Africa to Turkey tightened monetary policy to bolster their currencies.

Gold for April delivery rose the most in a week, while silver futures advanced 0.3 percent.

Six of 10 main industries in the index retreated. Energy and financial stocks fell at least 0.7 percent, contributing the most to the index’s slide.

CGI plunged 5 percent to C$33.47, the lowest since September. The information-technology company that worked on the Obamacare health exchange software reported first-quarter adjusted earnings of 65 Canadian cents per share, less than analysts’ profit estimates of 70 Canadian cents per share.

AGF slid 6.3 percent to C$11.63 for a sixth day of losses that left the stock at its lowest since July. The investment- management firm reported fourth-quarter earnings of 11 Canadian cents per share, less than the 12 Canadian cents per share analysts forecast.

Air Canada tumbled 6 percent to C$7.17. The carrier’s shares have lost 28 percent in five days of declines. The stock was the best performer on the S&P/TSX in 2013, soaring 323 percent.

Raw-materials producers gained 1.7 percent and an index of gold miners added 3.8 percent to the highest level since September. Detour soared 14 percent to C$7.25 and Barrick Gold Corp. jumped 4.2 percent to C$21.83, the highest since June.

Silvercorp Metals Inc. increased 6.2 percent to C$3.07 to pace gains among producers of the metal.

USA

By Nick Taborek

Jan. 29 (Bloomberg) — U.S. stocks sank, dragging benchmark indexes to the lowest levels since November, amid disappointing earnings forecasts and the Federal Reserve’s plan to reduce stimulus even amid turmoil in emerging markets.

Yahoo! Inc. slumped 8.7 percent, the most since July 2009, as its sales forecast signaled slowing growth. Boeing Co. retreated 5.3 percent for its worst drop in more than two years after its 2014 profit forecast trailed analysts’ estimates amid a slowing pace of jet orders. Dow Chemical Co. jumped 3.9 percent after stepping up its dividend and share-buyback plan.

The Standard & Poor’s 500 Index lost 1 percent to 1,774.20 at 4 p.m. in New York, wiping out yesterday’s advance and sending the benchmark gauge lower for the fourth time in five days. The Dow Jones Industrial Average dropped 189.77 points, or 1.2 percent, to 15,738.79 today. About 7.8 billion shares changed hands in the U.S., 26 percent above the three-month average.

“The emerging markets have been weak now for quite some time, but the drama has heightened really in the past few days,” Erik Davidson, the San Francisco-based deputy chief investment officer for Wells Fargo Private Bank, which oversees $170 billion, said by phone. “It would be out of sorts for the Fed to react on such a short-term news development.”

Stocks extended early losses as Fed policy makers pressed on with another $10 billion reduction in the monthly bond purchases intended to speed a recovery from the worst recession since the Great Depression. Some officials have expressed concern that the Fed’s record $4.1 trillion balance sheet could help create asset-price bubbles.

“Labor market indicators were mixed but on balance showed further improvement,” the Federal Open Market Committee said today in a statement following a two-day meeting in Washington that was the last for Chairman Ben Bernanke, who will be succeeded by Vice Chairman Janet Yellen on Feb. 1. “The unemployment rate declined but remains elevated.”

The Fed this month began paring the purchases by $10 billion a month to $75 billion. The reductions announced today will reduce the pace to $65 billion.

Three rounds of Fed monetary stimulus helped the S&P 500 rise as much as 173 percent from a 12-year low in 2009. The U.S. stock benchmark rallied 30 percent last year, the most since 1997. While the index reached an all-time high of 1,848.38 on Jan. 15, it has slumped 4 percent since then.

Speculation about Fed policy has caused turmoil in emerging market currencies. The Turkish lira depreciated as much as 2.4 percent today, even after the country more than doubled its key interest rate to stem capital outflows. South Africa’s rand also weakened as an unexpected increase in its benchmark interest rate failed to reassure investors.

Facebook Inc., Boeing and Dow Chemical are among the 25 S&P 500 companies reporting earnings today.

About 77 percent of the S&P 500 companies that have posted earnings this season beat analysts’ projections. Profit at S&P 500 companies probably rose 6.6 percent in the fourth quarter of 2013, and sales increased 2.6 percent, analysts’ estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index rose 9.8 percent today to 17.35. The gauge of S&P 500 options known as the VIX has gained 26 percent this year.

Nine of the 10 main groups in the S&P 500 retreated today as consumer staples companies fell 1.8 percent to pace losses.

Raw-materials suppliers advanced 0.5 percent for the only gain as DuPont Co. rallied 1.9 percent, the most in the Dow.

Yahoo slumped 8.7 percent to $34.89. The company forecast first-quarter sales that signaled slowing growth amid competition from Google Inc. and Facebook. Yahoo’s fourth- quarter net income rose 28 percent to $348.2 million, while net sales slipped to $1.2 billion from $1.22 billion a year ago, the company said.

Boeing slumped 5.3 percent, the most since August 2011, to $129.78. The world’s largest planemaker forecast a profit for 2014 that fell short of analysts’ estimates as the pace of its jet orders slows after the second-highest year in 2013.

AT&T Inc. retreated 1.2 percent to $33.31. The second- largest U.S. wireless carrier forecast 2014 earnings-per-share will grow at a “mid-single-digit” rate, compared with analysts’ estimates for an increase of 7 percent.

McCormick & Co. slid 6.2 percent to $65.30. The manufacturer of spices and flavorings forecast profit below analysts’ estimates, citing a higher tax rate and slower growth in its U.S. business.

Dow Chemical jumped 3.9 percent to $44.73. The largest U.S. chemical maker expanded its 2014 buyback plan to $4.5 billion from $1.5 billion, while raising the first-quarter dividend 16 percent to 37 cents. Fourth-quarter profit excluding one-time items was 65 cents, topping the 43-cent average of 20 estimates compiled by Bloomberg.

DuPont climbed 1.9 percent to $60.71 after a 1.1 percent decline in the previous session. The biggest U.S. chemical maker by market value said yesterday it will repurchase $5 billion of its shares after posting fourth-quarter earnings that exceeded analysts’ estimates.

Medivation Inc. gained 11 percent to $84.29 after saying its prostate-cancer drug Xtandi slowed the disease in a study.

The treatment slowed or stopped cancer growth in 59 percent of patients not on chemotherapy compared with 5 percent of those taking a placebo.

Have a wonderful evening everyone.

Be magnificent!

By education I mean an all-round drawing out of the best in a child and man – body, min, and spirit.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

I am not my body.  My body is nothing without me.

-Tom Stoppard, 1937-

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