July 27, 2016 Newsletter

Dear Friends,

Tangents:

Carolann is out of the office, I will be writing the newsletter on her behalf.

PHOTOS OF THE DAY

A group of folk dancers rehearse prior to the arrival of Pope Francis at the military airport in Krakow, Poland, Wednesday. Alik Keplicz/AP

People enter the water for a morning swim at Copabacana beach in Rio de Janeiro, Brazil, Wednesday. The iconic Copacabana beach will be the starting point for the road cycling race, marathon swimming and triathlon competitions at the summer Olympics. Felipe Dana/AP

Market Closes for July 27^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian shares ended little changed as energy producers slumped to the lowest level in three months, while gold miners rallied on the prospect for lower U.S. interest rates for longer.

     The S&P/TSX Composite Index fell less than one point to 14,546.54 at 4 p.m. in Toronto, paring earlier losses of as much as 0.4 percent after the Federal Reserve reiterated a gradual approach to tightening. Trading volume was 5.9 percent lower than the 30-day average. The benchmark is up 12 percent in 2016, making Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 22.4 for the S&P/TSX, about 11 percent higher than the S&P 500 Index.

     The Fed’s decision bolstered the price of gold, which tends to be a more attractive investment as a store of value against a weaker U.S. dollar in a low-rate environment. Futures prices rose 0.5 percent in New York to settle at $1,334.50 an ounce. Barrick Gold Corp. and Goldcorp Inc. added at least 3.1 percent. Raw-materials producers jumped 2.8 percent as a group.

     The gain in mining stocks extends a rally for the group this year to 60 percent, the best year-to-date performance for the group in at least 30 years, according to data compiled by Bloomberg. 

     Suncor Energy Inc. and Cenovus Energy Inc. retreated at least 1 percent to lead energy producers lower as five of 10 industries in the S&P/TSX retreated. Royal Bank of Canada fell 1.2 percent as financial services companies also fell.

     Crude for September delivery declined 2.3 percent in New York to settle at $41.92 a barrel. Inventories rose 1.67 million barrels, according to the Energy Information Administration, while analysts had forecast a 2 million barrel decline. Oil has slipped 18 percent since early June.

     Mining and energy stocks have propelled Canada to the second-best performance among developed markets, trailing only New Zealand. The S&P/TSX has joined global markets extending gains this month following a brief post-Brexit vote swoon amid a stretch of solid U.S. economic data and improving earnings.

     Global markets ended the day higher, as a gauge of developed and developing markets closed at the highest in eight months. Japan’s Prime Minister Shinzo Abe announced a 28 trillion yen ($265 billion) fiscal stimulus package.

     Investors also weighed earnings from Canadian companies. Intact Financial Corp. added 1.2 percent, closing at the highest level in nine months. The insurer reported second-quarter operating earnings well ahead of analysts’ estimates, even after accounting for a significant loss from the Fort McMurray, Alberta wildfires earlier in the year that forced the evacuation of the town. 

     Gildan Activewear Inc. slumped 5.6 percent, the most since October, after trimming the top end of its 2016 guidance. And CGI Group Inc. climbed 7.2 percent to lead technology stocks higher as third-quarter earnings topped estimates.

US

     New York (AP) — Stocks ended Wednesday’s trading slightly lower as shares of energy companies and consumer goods makers outweighed gains in technology companies like Apple.

     Investors also worked through the Federal Reserve’s latest policy statement. The Fed didn’t make any changes to interest rates but left the door open for increases later this year.

     The Dow Jones industrial average fell 1.58 points, less than 0.1 percent, to 18,472.17. The Standard & Poor’s 500 index lost 2.60 points, or 0.1 percent, to 2,166.58. The technology- heavy Nasdaq composite rose 29.76 points, or 0.6 percent, to 5,139.81.

     Apple jumped $6.36, or 6.6 percent, to $103.03. While the company reported lower revenue and iPhone sales, it still earned $10.5 billion last quarter, well above analysts’ estimates. Apple had been one of the biggest drags on the market this year as investors became concerned that its years of massive growth were coming to an end. Apple nearly erased its loss for the year.

     “The expectations for Apple were abysmal,” said Daniel Morgan, a portfolio manager at Synovus Trust Company who owns Apple shares. “Everyone is waiting for later this year, when Apple releases new products.”

     Apple, one of the 30 stocks in the Dow Jones industrial average, is the first of the major technology companies to report this week. Investors got results from Facebook after the close of trading Wednesday, which will be followed by Amazon and Google later this week.

     Coca-Cola, another component of the Dow, fell $1.48, or 3.3 percent, to $43.40 after the beverage giant trimmed its sales outlook for the year, citing weak demand in China and other international markets. Coke has faced headwinds in the U.S. and internationally as more consumers move away from sugary drinks.

     Twitter, which also reported its results late Tuesday, plunged $2.68, or 15 percent, to $15.77. The social media company reported another loss and said user adoption rates continue to slow. Roughly 313 million people regularly used Twitter last quarter, a fraction of the 1.6 billion people who use Facebook regularly.

     “It’s really now becoming a question on whether Twitter as a concept is something financially viable,” Morgan said. “Fundamentally, is this going to work?”

     The Federal Reserve voted to keep interest rates unchanged while noting that “near-term risks” to the economy have “diminished.” The Fed said the U.S. job market has rebounded, with strong job gains in June following weak growth in May. Investors will get another policy decision by one of the world’s central banks on Friday, when the Bank of Japan is likely to vote to increase its economic stimulus efforts.

     Benchmark U.S. crude fell $1, or roughly 2.3 percent, to close at $41.92 a barrel on the New York Mercantile Exchange, continuing its month-long decline. Brent crude, used to price international oils, fell $1.40 to $43.47 a barrel in London.

     Energy stocks were among the biggest decliners as oil prices fell. Marathon Oil, Transocean and Hess Corporation all fell roughly 4 percent or more.

     Bond prices rose. The yield on the 10-year Treasury note fell to 1.51 percent from 1.56 percent, most of the gains coming after the Fed’s announcement. The dollar rose to 105.23 yen from 104.63 yen and the euro fell to $1.1054 from $1.0986.

     In metals, the price of gold rose $5.90 to $1,326.70 an ounce, silver rose 31 cents to $20 an ounce and copper fell 4 cents to $2.19 a pound.

     In other energy commodities, heating oil fell 3 cents to $1.30 a gallon, wholesale gasoline futures fell 2 cents to $1.32 a gallon and natural gas fell 4 cents to $2.67 per 1,000 cubic feet.

Have a wonderful evening everyone.

Be magnificent!

“One of the most sincere forms of respect is actually listening to what another has to say.” Bryant H. McGill

As ever,

Karen

“Patience is the companion of wisdom.” Saint Augustine

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