June 7th, 2011 Newsletter
Dear Friends, another beautiful day has come and gone…here are the numbers for the day!
To be overcome by the fragrance of flowers
is a delectable form of defeat
. . . Beverly Nichols
Photos of the day
A giant Vesak Day display featuring a seated Buddha during the annual Buddhist festival in Colombo, Sri Lanka.
Buddhist followers light candles at the Borobudur temple during Vesak Day. Buddhists in Indonesia celebrate Vesak at the monument anually, which makes it the most visited tourist attraction in Indonesia. It is observed during the full moon in May or June. (Ulet Ifansasti/Getty Images)
Canada
By Matt Walcoff and Nikolaj Gammeltoft
June 7 (Bloomberg) — Canadian stocks fell for a sixth day as Research In Motion Ltd. retreated after an analyst downgrade and gold stocks slipped as concern over the European debt crisis lessened. BlackBerry maker Research In Motion declined 3.2 percent after Morgan Keegan & Co. reduced its rating on the shares to “market perform” from “outperform.” Kinross Gold Corp., Canada’s third-largest gold producer, declined 1.4 percent as the metal retreated from a five-week high. Sino-Forest Corp., a forest-products producer with operations in China, sank 34 percent after short seller Carson Block said he will release new research on the company.
The Standard & Poor’s/TSX Composite Index fell 35.74 points, or 0.3 percent, to 13,282.92 at 4 p.m. in Toronto after rising as much as 0.6 percent. The Canadian benchmark index fell in the last hour of trading as U.S. Federal Reserve Chairman Ben S. Bernanke, speaking in Atlanta, gave no hint of a new round of stimulus even as economic growth remains slow. “We’re all holding our breath here and hoping the worst is over,” said Barry Schwartz, a money manager at Baskin Financial Services Inc. in Toronto, which oversees C$400 million ($411 million). “Any way you slice it, the stock market is cheap, so it’s hard for me to imagine stocks are going to go lower.”
The S&P/TSX has dropped 4 percent in the last six days of trading, erasing its gains for the year, as the U.S. reported an increase in unemployment and crude futures slipped. Energy companies make up 27 percent of Canadian stocks by market value, according to Bloomberg data.
Precious Metals
Precious-metals producers fell after European Central Bank President Jean-Claude Trichet indicated he endorsed measures to encourage investors to buy new Greek debt.
Kinross declined 1.4 percent to C$15.07. Eldorado Gold Corp., which mines in China and Turkey, dropped for a seventh day, the longest streak since 2006, losing 2.3 percent to C$14.16.
B2Gold Corp., which explores in Latin America, surged 9.1 percent to C$3.61 after reporting drilling results from Uruguay that it called “positive.” The shares touched an intraday record of C$3.67. Sino-Forest declined 34 percent to a four-year low of C$4.05 after Block, the founder of Muddy Waters Research, said he will release more research on the company “pretty soon.” The new research will concern Sino-Forest’s accounting, its majority stake in Greenheart Group Ltd. and its 2010 purchase of Homix Ltd, Block said on a conference call.
Sino-Forest
Shares of the Hong Kong- and Mississauga, Ontario-based company have plunged 78 percent since June 1, the day before Block asserted the company overstated its land holdings and production. The company has denied doing so and has hired accounting firm PricewaterhouseCoopers LLP to conduct its own investigation.
Directory publisher Yellow Media Inc. slumped 4.5 percent to C$3.43 after closing at a record low yesterday. The shares have tumbled 30 percent since May 17, when San Francisco banned the unsolicited distribution of phone books. Research In Motion declined 3.2 percent to C$36.92 after Tavis McCourt, an analyst at Morgan Keegan & Co., reduced his rating on the shares to “market perform” from “outperform.” In a note to clients, McCourt said Apple Inc.’s new iMessage program threatens the popularity of RIM’s BlackBerry Messenger program.
Saputo Inc. slumped 1.3 percent to C$46.50. Canada’s largest food producer reported fourth-quarter of 55 Canadian cents a share, missing the average of six analyst estimates in a Bloomberg survey by 1.8 percent.
US
By Michael P. Regan and Inyoung Hwang
June 7 (Bloomberg) — U.S. stocks fell for a fifth day, the longest drop for the Standard & Poor’s 500 Index in 11 months, and Treasuries erased losses as Federal Reserve Chairman Ben S. Bernanke gave no sign he is planning new stimulus efforts to bolster the weakening economy.
The Standard & Poor’s 500 Index slipped 0.1 percent to 1,284.94 at 4 p.m. in New York, its lowest closing level since March 18. The 10-year U.S. Treasury yield decreased less than one basis point to 2.99 percent after rising as much as six points earlier, and two-year yields fell to their 2011 low. The euro climbed 0.8 percent to $1.4688, the strongest since May 5, as the European Central Bank signaled it may back Greek debt rollovers. Oil climbed on speculation increase in OPEC production quotas will reduce spare capacity.
The S&P 500 erased a rally of as much as 0.8 percent, turning lower in the final 10 minutes of trading, as Bernanke said in a speech in Atlanta that the economic recovery remains “uneven” and “frustratingly slow.” While the Fed chief said the central bank should maintain record monetary stimulus, he gave no indication he was planning a third round of asset purchases known as quantitative easing, nicknamed “QE3” by investors.
“Bernanke had a bearish outlook on the state of the economy,” said Kevin Shacknofsky, who helps manage $7 billion in Purchase, New York, for Alpine Mutual Funds. “There may have been some expectation for him mentioning that QE3 was on the table. But the key issues were his comments on the poor momentum of the U.S. economy and job growth as well as the risks that any fiscal austerity measures could damage a fragile economy.”
Slowing Growth
The S&P 500 is down 5.8 percent from an almost three-year high at the end of April as signs of a slowing economy spurred concern analyst estimates for 20 percent earnings growth this year are too optimistic. The slide has left the index trading at 12.2 times estimated profits of its companies, the cheapest forward valuation since last summer. Figures last week showed that payrolls grew at the slowest pace in eight months, the jobless rate unexpectedly rose to 9.1 percent and a private gauge of manufacturing expanded at the slowest pace in more than a year. “The economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed,” Bernanke, 57, said today in a speech to a conference in Atlanta. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”
Leading Declines
Cisco Systems Inc., Bank of America Corp. and Hewlett- Packard Co. lost at least 1 percent to lead declines in the Dow Jones Industrial Average, which reversed a gain of as much as 89 points to close down 19.15 points, or 0.2 percent, at 12,070.81.Intel Corp. rose 1.1 percent after Citigroup Inc. said that a potential foundry relationship may be forming with Apple Inc. International Paper Co. made a $3.31 billion hostile bid for Temple-Inland Inc., sending the target’s shares up 40 percent. International Paper, the world’s largest pulp-and-paper maker, advanced 0.4 percent.
Treasury two-year yields dropped two basis points to 0.41 percent. Yields on three-year notes dropped for a third day, slipping three basis points to 0.69 percent, after the U.S.government’s $32 billion auction of the debt drew the highest demand from a group including foreign central banks in five months. Longer-term debt yields were little changed before the $21 billion sale of 10-year notes tomorrow and the $13 billion 30-year bond offering June 9.
Euro Gains
The euro advanced 0.8 percent against the yen and appreciated versus 12 of its 16 most-traded peers. The dollar weakened against 11 of 16 major counterparts.
The ECB isn’t opposed to private-sector creditors being asked to “maintain their level of outstanding credit,” ECB President Jean-Claude Trichet said in Montreal yesterday, the first sign he endorsed measures to encourage investors to buy new Greek debt to replace maturing securities. German Chancellor Angela Merkel told U.S. President Barack Obama yesterday that the 17-nation euro region will overcome its debt crisis.
Most European stocks declined, with the benchmark Stoxx Europe 600 Index falling 0.1 percent to near a 10-week low, as losses in retail shares offset gains in utility companies. Tesco Plc and Home Retail Group Plc fell as a report showed U.K. retail sales declined last month. Utilities posted the best performance among 19 industry groups in the Stoxx 600, gaining 1.2 percent. Mitchells & Butlers Plc surged 3.8 percent after a report that a group of investors may bid for the pub and restaurant owner.
Oil Erases Drop
Oil erased declines in the final 90 seconds of trading, rising 8 cents to $99.09 a barrel. The S&P GSCI Index gained 0.7 percent as sugar, brent crude and lean hogs climbed more than 2 percent to lead gains in 17 of 24 commodities tracked by the index, while cotton and wheat lost at least 1.3 percent for the biggest declines. The MSCI Emerging Markets Index gained 0.3 percent, after earlier falling more than 0.5 percent. Benchmark gauges in Russia and Turkey advanced more than 1 percent.South Korea’s Kospi index dropped 0.7 percent and the won weakened against most major peers as the nation’s financial markets traded for the first time since a June 3 report showed slower-than-expected growth in U.S. payrolls. Thailand’s SET Index lost 1.1 percent after Goldman Sachs Group Inc. lowered its rating on the country’s stocks. The Australian dollar slipped against 10 of its major counterparts after policy makers kept the nation’s benchmark interest rate unchanged for a sixth consecutive meeting and said current settings were appropriate.
A painter paints pictures on canvas. But musicians paint their pictures on silence. ~Leopold Stokowski
Be Magnificent!
As ever~
Summer for Carolann
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor