July 18, 2011 Newsletter
Please note that Carolann will be away from the office, returning on Monday, July the 25th.
Although out of town, she is easily accessible VIA mobile phone, should you require any assistance during this time.
Photo of the Day:
A hare runs across the sixth green during the first round of the BritishOpen golf championship at Royal St George’s in Sandwich, southern England July 14, 2011. REUTERS/Kieran Doherty
Market Commentary:
Canada
(Reuters)
Toronto’s main stock market index retreated on Monday morning as sovereign debt fears triggered an exodus from riskier assets, though a record high for safe-haven gold tempered the decline.
European bank stress test results last Friday did little to calm fears that the euro zone crisis is getting worse, weighing on U.S. equities and other riskier assets. Concerns about the impact of the debt crises on global growth pushed down the price of oil, hitting Canadian oil and gas producers.
Energy shares slipped 0.5 percent and financials dropped 1.1 percent as investors focused Thursday’s emergency meeting of EU leaders to discuss a second bailout package for Greece.
In the United States, investors are nervous about the stalemate in Washington as the August 2 deadline looms for an increase in the statutory $14.3 trillion borrowing limit.
Royal Bank of Canada led the decliners, falling 1.4 percent to C$52.29, followed by Bank of Nova Scotia, down 1.4 percent at C$56.26 and Canadian Natural Resources, off 1.1 percent at C$39.32. “With the U.S. markets down so much it’s going to be hard for us to make headway. The one bright spot has been gold,” said John Kinsey, portfolio manager at Caldwell Securities, though he noted that the gold mining shares are still lagging the price of the commodity.
Gold prices rallied above $1,600 an ounce in Europe as spooked investors bought the metal as a haven from risk.
Goldcorp Inc was the most influential climber, up 2.3 percent at C$52.76, while Barrick Gold was close behind, advancing almost 2 at C$47.01.
US
(Bloomberg)
U.S. stocks fell, extending losses from last week for the Standard & Poor’s 500 Index, amid concern American lawmakers will fail to reach a deal on the nation’s debt limit two weeks before a deadline.
Financial shares slumped the most among 10 S&P 500 industry groups, with European leaders planning a summit this week as they seek to contain the region’s debt crisis. News Corp. fell 3.7 percent after two people familiar with the matter said independent directors are questioning whether a leadership change is needed after a phone-hacking scandal. LinkedIn Corp. slid 5.7 percent after JPMorgan Chase & Co. cut its rating.
The S&P 500 lost 1.1 percent to 1,301.83, the lowest level on a closing basis since June 28, at 3:23 p.m. in New York. The Dow Jones Industrial Average slumped 129.50 points, or 1 percent, to 12,350.23. A default by the U.S. would cause more panic than the collapse of Lehman Brothers Holdings Inc. in 2008, former Treasury Secretary Larry Summers told CNN in an interview broadcast yesterday.
“It looks like more partisan fighting is delaying any debt-ceiling resolution,” Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc. in Boston, wrote in an e-mail. “Words being thrown around like ‘catastrophe and Armageddon’ are certainly not soothing investors’ confidence.”
House Speaker John Boehner, a Republican from Ohio, said his party wouldn’t accept any tax increases as he worked on a deal to lower the deficit. As negotiators near the Aug. 2 deadline for raising the $14.3 trillion U.S. debt ceiling, President Barack Obama, a Democrat, is pushing to close tax loopholes for the richest Americans and corporations and cut discretionary spending by government.
S&P 500’s Tumble
The bankruptcy of Lehman Brothers prompted the biggest collapse of global financial markets since the Great Depression. It drove the S&P 500 down 46 percent between September 2008 and March 2009. The index dropped 2.1 percent last week amid concern the debt crisis in Europe is spreading and American lawmakers are putting the nation’s top credit rating in jeopardy.
Equities declined today as Goldman Sachs Group Inc. economists led by Jan Hatzius, based in Germany, cut their forecasts for real U.S. economic growth to 1.5 percent in the second quarter and 2.5 percent in the third quarter, from 2 percent and 3.25 percent, respectively. Hatzius’s team, in a report received after markets closed on July 15, cited lower-than-estimated economic data including a drop in the Thomson Reuters/University of Michigan consumer sentiment index to “territory normally associated with recession.” The gauge decreased in July to 63.8, the weakest level since March 2009.
Dow Stocks Fall
The VIX, as the Chicago Board Options Exchange Volatility Index is known, surged as much as 12 percent to 21.93 today, heading for its highest close in a month. Last week, the index, which measures the cost of using options as insurance against declines in the S&P 500, soared 22 percent, the most in a week since May 6. Even with today’s drop, the S&P 500 is up 3.6 percent for 2011.
“We still think that the intermediate term trend is positive, but when the risk fears are out there, you’ve got these gap down days like today, all the bears come out and the fears are there,” Timothy Ghriskey, the chief investment officer at the Solaris Group LLC in Bedford Hills, New York, which manages $2 billion, said in a telephone interview.
Bank Stocks
Of the 30 stocks in the Dow, Bank of America Corp. the Charlotte, North Carolina-based bank, fell the most, sinking 2.7 percent to $9.74.
Other bank shares also tumbled after eight European lenders failed stress tests last week, driving the region’s bank shares below the value of their tangible assets for the first time in two years. Citigroup Inc. fell 2.4 percent to $37.45. Genworth Financial Inc. fell the most in the S&P 500, dropping 8.4 percent to $8.99.
The 81-member S&P 500 Financials Index which lost the most last week since Nov. 12, retreated 1.6 percent. Financial shares in the S&P 500 are trading at 12.6 times earnings, the lowest level since December 2007, data compiled by Bloomberg show.
Goldman Sachs Group Inc., Bank of America and Wells Fargo & Co. are all scheduled to report tomorrow morning that quarterly earnings grew at least 5 percent from a year ago.
More Earnings
More than 100 companies in the S&P 500 are scheduled to report quarterly results this week, including International Business Machines Corp. today, according to data compiled by Bloomberg. Technology companies from Yahoo! Inc. to Apple Inc. are set to post results tomorrow.
Among the 17 S&P 500 companies that posted results since July 11, 14 beat the average analyst estimate for per-share profit, data compiled by Bloomberg show.
MGIC Investment Corp. reported a per-share loss excluding some items that was almost eight times bigger than the average analyst estimate. Shares of the largest U.S. mortgage insurer declined 22 percent after sinking 27 percent, the most intraday since May 2009, to $4.66.
WebMD Health Corp., the medical-information company, fell 30 percent to $32.65 after reducing its 2011 forecast for profit and sales, citing an anticipated decline in advertising revenue.
‘Dead Money’
News Corp. slumped 3.7 percent to $15.06. Chairman and Chief Executive Officer Rupert Murdoch is struggling to control the destiny of the company he began building six decades ago after a trusted deputy was arrested and Scotland Yard’s top official quit.
“The company is at risk right now,” Porter Bibb, managing partner at Mediatech, a New York-based investment bank, said on Bloomberg Television’s “In Business with Margaret Brennan.” “News Corp. is a very good, very strong, very profitable company, but it’s in jeopardy, and the Street has called investing in News Corp. today dead money.”
LinkedIn fell 5.7 percent to $103.72 after JPMorgan cut its rating to “neutral” from “overweight.” The website focused on job seekers and recruiters has more than doubled since the shares began trading in May, and JPMorgan said it downgraded the stock based on “valuation rather than fundamental concerns.”
“To reach a port we must sail..Sometimes with the wind and sometimes against it..But we must not drift or lie at anchor..”
– Oliver Wendell Holmes
Have a wonderful evening!
Kyle, for Carolann