July 19, 2013 Newsletter

Dear Friends,

Tangents:

“Summer is a  time when we often seek out books that will charm or entertain us – something sunny to be savored from a  hammock or a beach chair.  But summer reading can touch us more deeply, changing us in ways that linger long after vacation season is over….The love of a book, like any great romance, depends on a peculiar chemistry between souls that’s hard to quantify and even harder to predict.  That’s the essential mystery of reading, that we never quite know when the magic will strike…” –Danny Heitman.

A friend of mine recently gave me a book to read which is an amazing story.  She brought it to me and said, “You have to read this.”   She is very erudite, and I truly respect her opinion on all things, so I started reading it right away.  It is entitled The Garden of Evening Mists by Tan Twan Eng.  It is definitely a page turner.  It was short-listed for The Man Booker Prize in 2012. I highly recommend it.  It will open your eyes/mind to a whole different world.  Happy reading from that hammock or beach chair!

Photo of the Day –July 19th, 2013

Saratoga Race Course pony boy Jesse Costa rides Vegas early morning in Saratoga Springs, N.Y. The 150th horse racing meet at Saratoga opens on Friday, July 19th. Mike Groll/AP

A true friend never gets in your way unless you happen to be going down. –Arnold H. Glasgow, 1905-1998.

Market Closes for July 19^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katie Brennan

July 19 (Bloomberg) — Canadian stocks rose, capping a fourth straight week of gains for the benchmark index, as an increase in metals prices boosted materials producers and China planned to remove the floor on lending rates.

Centerra Gold Inc. added 4.2 percent as the metal’s price climbed for a second week. Athabasca Oil Corp. jumped 6.7 percent as oil rose to a 16-month high. BlackBerry Ltd. fell 1.3 percent, reversing an earlier rally of as much as 2.2 percent.

The Standard & Poor’s/TSX Composite Index rose 56.28 points, or 0.5 percent, to 12,685.13 at 4 p.m. in Toronto. The benchmark gauge rallied 1.8 percent for the week. Trading volume was 8.4 percent below the 30-day average at this time of day.

“Materials, energy and financials are really the main areas,” said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto. He helps manage about $1 billion ($953 million). “There’s a large commodity factor in the Toronto market. Gold and energy or oil stocks are up and it is nice to see them following the commodities. Financials have had a nice run and are pausing a bit today but are still up.”

A government report showed inflation in June quickening for a second month in June as the prices of gasoline and automobiles rebounded. The consumer price index rose 1.2 percent from a year ago following a 0.7 percent gain in May, matching the Bloomberg economist surveys forecast, Statistics Canada said today from Ottawa.

Bank of Canada Governor Stephen Poloz said this week that inflation will remain below his 2 percent target until mid-2015 and stay “subdued” over the next few months.

The People’s Bank of China said it will remove the floor on lending rates offered by financial institutions starting tomorrow. The announcement builds on pledges by Premier Li Keqiang to expand an overhaul of interest rates, a development the World Bank says must be a priority in reform of the financial system.

Four of 10 groups in the S&P/TSX advanced, led by a 2 percent gain among producers of raw materials.

Centerra Gold added 4.2 percent to C$4.27 and Detour Gold Corp. increased 6.7 percent to C$10. The price of the metal rose 0.7 percent to $1,294 an ounce in New York. Silver and copper also advanced.

Athabasca Oil jumped 6.7 percent to C$7 and Penn West Petroleum Ltd. gained 6.3 percent to C$12.91. Oil was up 1 cent to $108.05 a barrel after climbing as much as 1.2 percent.

Financial shares rose 0.2 percent for the fourth gain in five sessions. The S&P/TSX Commercial Banks Index rose for the seventh straight day to trade near a record high.

BlackBerry dropped 1.3 percent to C$9.30. The stock was up as much as 2.2 percent after BMO Capital Markets analyst Timothy Long upgraded his rating from underperform to market perform, an equivalent of hold. Long said the stock had less downside after plunging 38 percent since June 27, the day before the company reported disappointing sales.

US

By Alex Barinka and Nikolaj Gammeltoft

July 19 (Bloomberg) — U.S. stocks rose, giving the Standard & Poor’s 500 Index a fourth straight week of gains, as better-than-forecast results from General Electric Co. offset disappointing earnings from Google Inc. and Microsoft Corp.

GE surged 4.6 percent to the highest in almost five years, pacing gains among industrial shares. Pfizer Inc. advanced 2.1 percent to boost health-care stocks. Technology shares sank 2 percent. Microsoft, the world’s largest software maker, plunged 11 percent and Google, owner of the most popular Internet search engine, lost 1.6 percent. Advanced Micro Devices Inc. retreated 13 percent after saying its gross margin would narrow in the current quarter.

The S&P 500 rose 0.2 percent to a record 1,692.09 at 4 p.m. in New York, erasing an earlier decline of as much as 0.3 percent. The Dow Jones Industrial Average lost 4.8 points, or less than 0.1 percent, to 15,543.74. The Nasdaq 100 Index slid 1.1 percent to 3,044.93, the biggest drop in a month. About 5.9 billion shares traded hands on U.S. exchanges today, or 7.3 percent below the three-month average.

“Earnings have held up reasonably well,” said Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Plc’s wealth unit in London. “We’ve seen some winners and some losers coming through. There has been disappointment around technology, but we don’t necessarily think that is going to be a long-term trend.”

U.S. stocks rallied yesterday, sending the S&P 500 and the Dow average to records, as earnings from Morgan Stanley and UnitedHealth Group Inc. beat estimates and jobless-benefit claims declined to a two-month low. The S&P 500 climbed 0.7 percent in the past five days and is up 19 percent this year.

About 84 percent of stocks in the index traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. While that’s below a 19-month high of 93 percent reached in May, it’s up from its 2013 bottom of 12.8 percent in June. Some 108 stocks in the index closed at a 52-week high yesterday; none finished at a 52-week low.

Equities futures got a brief boost today after the People’s Bank of China said it will remove the floor on lending rates offered by financial institutions starting tomorrow. The announcement builds on pledges by Premier Li Keqiang to expand an overhaul of interest rates, a development the World Bank says must be a priority in reform of the financial system.

Federal Reserve stimulus and better-than-forecast corporate earnings have helped fuel a surge in stocks worldwide, with the S&P 500 jumping 150 percent from its March 2009 low. Yesterday’s rally pushed the gauge’s valuation to 15.3 times estimated profit, the highest since April 2010, data compiled by Bloomberg show.

Investors have increasingly turned to stocks this month, as U.S. equity exchange-traded funds are getting money at the fastest rate since September 2008. About $27.9 billion was sent to American share ETFs in the last 13 days, about four times the amount deposited last month and the most in almost five years, according to data compiled by Bloomberg from about 1,500 funds.

Mutual funds that invest in U.S. shares had $4.55 billion of inflows during the week through July 10, ending seven consecutive weeks of withdrawals, according to data from the Washington-based Investment Company Institute released yesterday.

The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, dropped 8.8 percent to 12.56, its lowest level since May 17. The measure has fallen 11 out of the past 12 trading sessions.

Of the companies on the S&P 500 that have reported earnings so far, about 72 percent have topped analysts’ estimates, according to data compiled by Bloomberg. About 53 percent have beaten revenue projections.

Earnings among financial companies in the S&P 500 have outperformed the index average, with 80 percent of the firms surpassing estimates. The group’s results have exceeded forecasts by an average of 8.7 percent.

Banks and insurers are predicted to report earnings growth of 26 percent this quarter, data compiled by Bloomberg show.

Excluding financial stocks, analysts forecast S&P 500 companies will report a 2 percent drop in profit, the data show.

Capital One Financial Corp. climbed 3.1 percent to $69.14, the highest since October 2007. The lender that gets more than half its revenue from credit cards posted a second-quarter profit that beat analysts’ estimates by 8.3 percent as a boost in U.S. consumer confidence helped fuel spending.

Seven of 10 groups in the S&P 500 advanced. Health-care stocks rallied 1.4 percent as Pfizer gained 2.1 percent to $29.09.

Industrial shares added 1.2 percent. GE surged 4.6 percent to $24.72, the highest since September 2008. Demand for jet engines and drilling equipment drove the company’s order backlog to a record. Adjusted profit from continuing operations fell 8 percent to $3.7 billion, or 36 cents a share. That exceeded the 35-cent average analyst estimate.

Whirlpool Corp. rallied 8 percent to $128.91 for the biggest gain in the S&P 500. The maker of home appliances raised its 2013 earnings target as it anticipates to benefit from U.S. energy tax credits.

Schlumberger Ltd. rose 5.4 percent to $82.74, a two-year high, helping energy shares rally 1.4 percent. The world’s largest oilfield-services provider announced a $10 billion share buyback plan as quarterly profit rose and it forecast “double- digit” customer spending increases on crude exploration.

Chipotle Mexican Grill Inc. jumped 8.6 percent to $408.97, the highest in a year. The burrito chain that recently started selling tofu posted second-quarter profit that topped the average analyst estimate, as an increase in traffic boosted sales at its established restaurants.

Technology stocks led declines today, slumping 2 percent for a second day of losses. Earnings from the group have disappointed the most among 10 industries in the benchmark gauge. The 17 companies that have reported have missed estimates by an average 3.6 percent. The average result for all companies has come in 2.7 percent above forecasts, the data show.

Analysts predict the technology group will report a 8 percent decline in profit, compared with a 2.4 percent increase estimated for the S&P 500 as a whole.

“It is a bit of a lukewarm earnings overall with a couple of high-profile misses,” said James Dunigan, who helps oversee $118 billion as chief investment officer in Philadelphia at PNC Wealth Management. “We will start to see more of a micro view than a macro view of the market, looking at individual stocks and individual sectors across the board.”

Microsoft sank 11 percent to $31.40, the biggest drop since January 2009, after reaching a five-year high on July 16. The software company said fourth-quarter profit missed analysts’ projections by the biggest margin in at least a decade amid weaker demand for personal computers running Windows.

Google fell 1.6 percent to $896.60 after second-quarter sales and profit fell short of estimates as mobile advertising crimped average prices. The stock slid as much as 3.9 percent earlier in the session.

AMD sank 13 percent to $4.03 for the biggest drop in the S&P 500. The second-largest maker of personal-computer processors forecast a drop in third-quarter gross margin, even as it predicted higher sales.

Intel Corp. slipped 0.9 percent for a third day of losses, and EBay Inc. slid 2.5 percent. Both reported on July 17 sales forecasts that fell short of estimates.

Intuitive Surgical Inc. plunged 6.8 percent to $392.67, the lowest since October 2011. The robot surgery company cut its revenue forecast and earnings missed targets. Intuitive has lost about $6 billion in value over five months after disclosures about adverse events with its products, a recent recall and,now, a regulatory warning it hasn’t adequately reported on issues concerning the devices.

Have a wonderful weekend everyone.

Be magnificent!

As an individual, a specific entity, you have physical, mental, and nervous limits, among others.

If you know your own limits and try to stay within these limits,

you are free.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

When someone shows you who they are,

believe them the first time.

-Maya Angelou, 1928-

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