June 17, 2016 Newsletter

Dear Friends,

Tangents:

Happy Father’s Day!

HE WISHES FOR THE CLOTHS OF HEAVEN
William Butler Yeats

Had I the heavens’ embroidered cloths,
Enwrought with golden and silver light,
The blue and the dim and the dark cloths
Of night and light and the half-light,
I would spread the cloths under your feet:
But I, being poor, have only my dreams;
I have spread my dreams under your feet;
Tread softly because you tread on my dreams.

PHOTOS OF THE DAY

Racegoers in top hats watch a horse race during Royal Ascot at the Ascot Racecourse in England on Friday. Andrew Boyers/Reuters

Ferrari driver Sebastian Vettel of Germany steers his car during his second free practice session at the Baku circuit in Azerbaijan on Friday. The Formula One Grand Prix of Europe will be held on Sunday. Luca Bruno/AP

Market Closes for June 17^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Anna-Louise Jackson

     (Bloomberg) — Canadian stocks advanced for the second time in nine days, mirroring a rebound in oil and global equities after campaigning in Britain’s referendum on European Union membership was suspended.

     The S&P/TSX Composite Index advanced 0.1 percent to 13,901.77 as of 4 p.m. in Toronto. Three of the gauge’s 10 main industries rose, led by energy companies, which snapped a three- day selloff. A report today showed inflation in the country eased in may as food costs rose at the slowest pace in more than two years.

     While global stocks rebounded from a four-week low, U.S. equities retreated. The Canadian dollar snapped the longest steak of losses since January.

     Oil prices jumped the most in two months, helping buoy shares of energy companies. The group added 0.9 percent, as Enerplus Corp. surged 7.1 percent and Baytex Energy Corp. advanced 5 percent.

     Shares of raw-materials pared an earlier rally, closing 0.1 percent higher. Nevsun Resources Ltd. slumped 9.7 percent to a four-month low after it sweetened a bid for Reservoir Minerals Inc., a takeover bid that shareholders voted to accept on Friday. Turquoise Hill Resources 17 percent over five days after reports emerged earlier this week that its controlling shareholder Rio Tinto Group is looking into taking the Vancouver-based company private.

     Health-care stocks extended a three-day selloff to the lowest level since December 2010, as Concordia Healthcare Corp. slumped to a two-year low. Meanwhile, shares of utilities companies fell 1.6 percent, the most since February, led by Innergex Renewable Energy Inc.’s 4.3 percent slump.

US

By Oliver Renick and Bailey Lipschultz

     (Bloomberg) — U.S. stocks retreated, sending the S&P 500 Index lower for the sixth time in seven days, amid selling in health-care and technology shares that have been the market’s weakest all year.

     Apple Inc. posted its biggest slide in five weeks, dragging down the tech group after regulators in China said the latest IPhones violated a design patent of a Chinese company. Google parent Alphabet Inc. and Merck & Co. fell more than 2.7 percent, while the Nasdaq Biotechnology Index slid 2 percent to mark the longest losing streak in 20 years. Commodity shares rallied with crude oil, helping to lift equities off the worst levels of the day.

     The S&P 500 declined 0.3 percent to 2,071.22 at 4 p.m. in New York, resuming a slide after rising Thursday to halt the longest stretch of losses since February. The gauge posted the second consecutive weekly drop, falling 1.2 percent. The Dow Jones Industrial Average lost 57.94 points, or 0.3 percent, to 17,675.16. The Nasdaq Composite Index sank 0.9 percent to the lowest since May 23.

     “The market is nervous about valuations in general, they’re still nervous about the Fed and what they’re going to do, and what Europe is going to do,” Thomas Garcia, head of equity trading at Thornburg Investment Management Inc. in Santa Fe, New Mexico, said by phone. “There’s a lot more to worry about than just Brexit. We just can’t break these levels either way, and we’re just trading in a range.”

     About 9.1 billion shares traded hands on U.S. exchanges, 30 percent above the three-month average after a quarterly event known as quadruple witching, when futures and options contracts on indexes and individual stocks expire. Some of the biggest instruments for protection against losses in equities rolled over just a few days before the U.K.’s referendum on secession, an event that forces would-be hedgers to take up new positions.

     Equities were whipsawed Thursday, erasing losses that had reached 1 percent, after both sides on the Brexit issued suspended their campaigns following the murder of Labour Party lawmaker Jo Cox, who was a “Remain” proponent. The event shifted investor sentiment after a series of polls in recent days indicated more Britons favor leaving the EU. Stocks in Europe rose Friday as Brexit concerns abated and energy shares followed oil higher.

     “When you look at the difference in markets between the U.S. and Europe, for the past week the U.S. has gone down significantly less than Europe,” said Walter Todd, who oversees about $1.1 billion as chief investment officer for Greenwood Capital Associates LLC in South Carolina. “So you may just be seeing a relief rally in Europe, and even with the U.S. down it’s still outperforming international markets for the past week.”

     Bookmakers’ odds today indicated a lower chance of the “Leave” side winning. Federal Reserve Chair Janet Yellen and central banks in Britain, Japan, Canada and Switzerland have warned this week over the potential for economic damage in the event of a secession.

     Meanwhile, investors have been bracing for turbulence like never before. Trading volume for securities linked to the CBOE Volatility Index surged to a record high this week. The measure of market turbulence known as the VIX edged up 0.2 percent Friday to 19.41, bringing its monthly gain to about 37 percent, on track for the most since August.

     Concern that Britain will exit the union, and thereby weaken the global economy, has weighed on financial markets ahead of the June 23 vote, with the S&P 500 headed for its biggest weekly decline since April. Investors were also unnerved by a mediocre growth outlook implied by Yellen’s dovishness after Wednesday’s Fed meeting, as well as a lack of action from other prominent central banks that fueled perceptions policy makers are increasingly at a loss about what to do in the face of a struggling global economy.

     A report today showed new-home construction in the U.S. was little changed in May, a sign the residential real-estate industry’s contribution to economic growth in the second quarter will be muted. The chances of a July boost in borrowing costs have fallen to 6 percent, from about 16 percent before the Fed this week scaled back its projections for increases. Odds of a move only rise to about 40 percent for as late as February 2017.                        

     The S&P 500 has slipped 2.3 percent since June 8 when the benchmark came within 0.6 percent of its record set almost 13 months ago. Brexit worries have stymied the latest run toward the all-time high after the gauge rallied as much as 16 percent from a 22-month low in February, boosted by crude’s recovery from a 12-year low and optimism that a mix of low rates and moderate economic growth would continue to support higher share prices.

     In Friday’s trading, five of the S&P 500’s 10 main industries declined, with health-care and technology companies dropping at least 0.9 percent. Consumer staples, one of yesterday’s rally leaders, retreated 0.5 percent. Energy stocks rose 0.8 percent, while raw-materials and phone companies climbed at least 0.4 percent.

     Merck saw the steepest slide in four months amid analyst comments on sales for a hepatitis drug. That combined with a ninth consecutive decline for biotechnology shares to send the health-care group to the worst day in more than a month. Pfizer Inc. and Bristol-Myers Squibb Co. lost more than 1.4 percent.

     Alphabet slumped to the lowest in nearly two months, joining Apple as the biggest drivers of losses in tech, following comments on search trends from Citigroup Inc. Activision Blizzard Inc. and Visa Inc. fell more than 1.7 percent. Offsetting some of the declines in the group, Oracle Corp. added 2.7 percent after reporting sales that topped analysts’ estimates as cloud-based products picked up momentum with corporate customers.

     Energy shares rallied to halt a seven-day drop, the longest since August. Crude jumped the most in two months, rising 3.8 percent as a weaker dollar bolstered the appeal of commodities. Murphy Oil Corp. added 4.9 percent, and Transocean Ltd. gained 7.5 percent.

     Among other shares moving on corporate news, Revlon Inc. advanced the most since February after a deal to acquire Elizabeth Arden Inc. for about $419 million, a wager that uniting two aging cosmetics giants can reinvigorate both companies’ brands. Elizabeth Arden Inc. surged 49 percent.

     Smith & Wesson Holding Corp. jumped 8.7 percent, its best day in five months, after predicting firearm demand would hold strong — regardless of any fallout from the mass shooting in Florida — and two research firms upgraded the shares. The company’s quarterly results also beat estimates.

     Lumber Liquidators Holdings Inc. soared 19 percent, the steepest climb this year, after regulators ended a probe of formaldehyde in the company’s flooring without issuing a product recall.
 

Have a wonderful weekend everyone.

Be magnificent!

Propaganda can never tell the truth; truth can never be propagated.

Krishnamurti

As ever,

Carolann

Real riches are the riches possessed inside.

                         -B.C. Forbes, 1880-1954

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