March 13, 2014 Newsletter

Dear Friends,

Tangents:

The World Wide Web is 25 years old today.  It was first proposed by Tim Berners-Lee while working at the CERN physics lab in Switzerland.  Dr. Berners-Lee wanted to make sure that scientists working collaboratively would have access to the same information and that nothing would be lost.  He stated in his original proposal, “The aim would be to allow a place to be found for any information or reference which one felt was important, and a way of finding it afterwards. The result should be sufficiently attractive to use that the information contained would grow past a critical threshold.”  And it is incredible how far it has come and how it has transformed lives.

On this day six years ago, gold prices on the New York Mercantile Exchange hit $1000/ounce for the first time ever.

On this day in 1781, the planet Uranus was discovered.

Photos of the day

Traffic lights are seen in early morning thick fog in London. Flights have been cancelled at London City airport and Heathrow, The Woolwich ferry cancelled and low visibility has caused slow traffic on motorways. Russell Boyce/Reuters

Hindu priests throw colored powder at the devotees during Holi celebrations at Bankey Bihari temple in Vrindavan, in the northern Indian state of Uttar Pradesh. Holi, also known as the Festival of Colors, heralds the beginning of spring and is celebrated all over India. Ahmad Masood/Reuters

Market Closes for March 13^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

March 13 (Bloomberg) — Canadian stocks fell the most in a month as copper declined on weaker-than-estimated industrial output in China and while earnings from Transat AT Inc. and Empire Co. trailed estimates.

Transat AT plunged 17 percent after reporting a loss due in part to the declining Canadian dollar. Empire sank 3 percent after posting earnings that fell 32 percent short of estimates. Bombardier Inc. rallied 2.7 percent after analysts at RBC Capital Markets raised their rating for the stock. Teck Resources Ltd. and First Quantum Minerals Ltd. dropped more than 2 percent as copper traded near a 44-month low. BlackBerry Ltd. fell a seventh day, the longest losing streak in two years.

The Standard & Poor’s/TSX Composite Index lost 73.86 points, or 0.5 percent, to 14,245.14 at 4 p.m. in Toronto, the most since Feb. 3. The index has gained about 4.6 percent this year.

Global stocks fell, with the MSCI All-World Index slumping 0.9 percent to a one-month low. The S&P 500 lost 1.2 percent, erasing its gains for the year.

“The Canadian market is trying to find its footing here amid contrasting data from China and the U.S.,” said Patrick Blais, a fund manager at Manulife Asset Management Ltd. in Toronto. He helps manage about C$265 billion ($240 billion) at the firm. “Copper has taken a massive hit and there could be further downside if data from China continues to weaken. In the U.S., markets have been willing to dismiss recent weak data points because of weather. It definitely needs to show the economy is on track or markets may pull back.”

Industrial production in China grew 8.6 percent in the first two months of 2014, China’s statistics bureau said today. Analysts surveyed by Bloomberg had forecast a 9.5 percent advance. Copper for May delivery fell 1.3 percent to $2.923 a pound for the fourth decline in five days.

Teck Resources, Canada’s largest diversified miner, slipped 2.4 percent to C$22.70 and First Quantum Minerals Ltd. lost 2 percent to C$18.84. Copper prices have slumped 13 percent this year, the most among six metals traded on the London Metal Exchange.

U.S. jobless claims unexpectedly fell last week to 315,000, the lowest since the end of November, and retail sales rose for the first time in three months in February. Gold for April delivery rose 0.1 percent to $1,372.40 an ounce in New York, a six-month high, erasing earlier losses.

Through yesterday, gold had risen 14 percent this year as investors sought a haven amid signs of weakening U.S. growth and rising tension between Russia and Ukraine.

U.S. Secretary of State John Kerry warned of “very serious” steps from Europe and the U.S. if there is no sign of resolution between the two countries ahead of a vote this weekend in the Crimea region on a separatist resolution.

Alacer Gold Corp. jumped 10 percent to C$3.50 and Detour Gold Corp. rallied 12 percent to C$11.92, highest since August. Nine of 10 industries in the benchmark Canadian equity gauge declined on trading volume 12 percent higher compared with the 30-day average.

Transat AT, the airline and travel agency retailer, plunged 17 percent to C$9.10 for the biggest decline in three years. The company reported a loss of 60 Canadian cents a share in the first quarter, compared with analysts’ projections of a smaller 45-cent loss, and blamed the declining Canadian dollar. The falling loonie, which is down 3.9 percent versus the dollar this year, resulted in a C$14 million increase in operating expenses, the company said.

Empire, which operates the Sobeys grocery store chain, declined 3 percent to C$68.10. The company reported adjusted earnings of 84 Canadian cents a share in the third quarter, short of estimates for C$1.23. Same-store sales for its Sobeys chain declined 0.2 percent in the quarter.

Bombardier added 2.7 percent to C$3.88 after Walter Spracklin, analyst at RBC Capital Markets, raised his rating for the stock to outperform, the equivalent of a buy.

As a result of progress in Bombardier’s long-delayed CSeries testing program, liquidity risks have abated and the company is in position for improving sales heading into the Farnborough, U.K., airshow in July, Spracklin said.

“The near-term risk to reward on Bombardier shares is once again compelling,” Spracklin said in a note to clients.

BlackBerry, the struggling smartphone maker, fell 2.7 percent to C$9.99 for a seventh day of losses, the longest streak since November 2011. The stock has slumped 13 percent in seven days.

US
By Joseph Ciolli and Callie Bost

March 13 (Bloomberg) — U.S. stocks fell, erasing this year’s gains for the Standard & Poor’s 500 Index, as weaker- than-forecast data from China and tension in Ukraine overshadowed reports showing an improving American economy.

United Technologies Corp., Pfizer Inc. and American Express Co. tumbled more than 2.4 percent as all 30 members of the Dow Jones Industrial Average declined. An S&P gauge of homebuilders lost 2.4 percent, falling for a seventh straight day. Dollar General Corp. slipped 2.8 percent as it forecast earnings below analyst estimates.

The S&P 500 fell 1.2 percent to 1,846.34 at 4 p.m. in New York. The benchmark index reversed earlier gains after climbing to within four points of its closing record of 1,878.04 reached on March 7. The Dow dropped 231.19 points, or 1.4 percent, to 16,108.89. Both gauges had their biggest declines since Feb. 3. About 7.5 billion shares changed hands on U.S. exchanges, 12 percent above the three-month average.

“The U.S. data was quite good, but the market doesn’t want to acknowledge that today,” Lillian Seidman, an options strategist at Miller Tabak & Co. in New York, said in an interview. “There’s China concern and Ukraine is not helping. Overall there are many factors to force out sellers right now.”

The S&P 500 has declined 1.7 percent this week, sending the index to a 0.1 percent loss for the year, amid signs China’s economy is slowing and the crisis in Ukraine is escalating.

The U.S. and Germany stepped up pressure on Russia to back down from plans to annex Crimea from Ukraine after the region holds a referendum in three days, warning they’ll exact an economic toll if Russia doesn’t.

Secretary of State John Kerry told a Senate panel in Washington that the U.S. and Europe will take “very serious” steps the day after the vote “if there is no sign” of a resolution to the crisis.

China’s industrial-output, investment and retail-sales growth cooled more than estimated in January and February, data showed today. China announced an economic growth target of 7.5 percent last week, the weakest since 1990, and had its first onshore bond default after a solar-panel maker failed to make an interest payment.

“Ongoing concerns about China’s growth and the fluid situation in Ukraine continue to linger on markets,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said. “As Kerry meets with his Russian counterpart tomorrow in a last-ditch effort to divert the referendum, markets could be a little jittery, and we might be seeing some of that play out today as well.”

Global concerns overshadowed better-than-forecast data in the U.S. Retail sales rose in February for the first time in three months, as Americans ventured out to shop even as colder- than-normal temperatures and severe snowstorms blanketed parts of the U.S. A separate report showed the number of Americans filing for unemployment benefits unexpectedly dropped last week to the lowest level since the end of November, indicating further improvement in the labor market.

The government’s monthly jobs report last week showed U.S. employers added more workers than estimated in February. The Federal Reserve is trying to determine how much recent economic data has been affected by weather.

“The lingering question has been how disruptive this deep freeze has been to the economy,” James Dunigan, who helps oversee $127 billion as chief investment officer in Philadelphia at PNC Wealth Management, said by phone. “As we come out of this deep thaw, if we get some better, more clear data on the underlying trend, we’re going to see that the economy is continuing to gain momentum.”

The S&P 500 rallied to all-time highs this year as Fed Chair Janet Yellen said the U.S. economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 173 percent from a 12-year low, as U.S. equities begin the sixth year of a bull market that started March 9, 2009.

The Federal Open Market Committee, which meets March 18-19, has cut monthly bond buying to $65 billion from $85 billion in December. Policy makers have indicated they plan to taper by $10 billion at each meeting absent a weakening in the economy.

“After last Friday’s employment numbers, we believed they were worthy of the FOMC continuing to take $10 billion off the table every month,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. “After the March 18-19 meeting, we should be at $55 billion a month.”

Stocks are falling at the anniversary of a bull market that sent the S&P 500’s price-earnings ratio to 17, approaching the level where equities peaked in 2008. The advance is about a week away from supplanting the stretch of equity gains that lasted from 1982 to 1987 to become the fifth longest of all time, according to Bespoke Investment Group LLC.

It’s also three weeks before the end of the first quarter, a period for which Wall Street analysts have lowered forecasts for U.S. earnings growth to 1.9 percent from 6.6 percent at the start of 2014, according to data compiled by Bloomberg. For all of 2014, analysts see profits climbing 7.6 percent, compared with an estimate of 9.7 percent at the end of December.

The decline in equities comes after more than $41 billion returned to U.S. exchange-traded funds that own shares in the past four weeks, reversing withdrawals that swelled to as much as $40.2 billion last month, according to data compiled by Bloomberg.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, rose 12 percent to 16.22 today. The measure has advanced 18 percent this year.

Nine of 10 main industries in the S&P 500 fell today, with industrial and technology shares dropping more than 1.4 percent. The Morgan Stanley Cyclical Index tumbled 1.6 percent and the Dow Jones Transportation Average slid 1.4 percent.

An S&P index of homebuilders lost 2.4 percent, bringing its decline for the month to 8 percent, as Toll Brothers Inc. dropped 2.7 percent to $36.77 and PulteGroup Inc. fell 2.5 percent to $19.18.

Discount retailer Dollar General slipped 2.8 percent to $57.66 after forecasting first-quarter earnings of no more than 74 cents a share, below the 81 cents estimated by analysts.

Family Dollar Stores Inc. tumbled 2 percent to $60.43.

Offshore drillers decreased after ISI Group said in a client note that deepwater rig demand is weaker than the market has anticipated. Diamond Offshore Drilling Inc. slid 4.3 percent to $44.39, the lowest level since 2005. Noble Corp. fell 4.6 percent to $28.98. Transocean Ltd. erased 3.1 percent to $39.54.

PVH Corp., which owns Calvin Klein, declined 5.7 percent to $115.04. The company was downgraded to market perform from outperform at Wells Fargo & Co., while Morgan Stanley lowered its rating to equalweight from overweight.

Williams-Sonoma Inc. jumped 9.8 percent to $64.74. The seller of cookware and home furnishings forecast same-store sales growth of 5 percent to 7 percent this year, compared with the 3.7 percent average analyst projection. Revenue will reach $4.63 billion to $4.71 billion, Williams-Sonoma predicted. Analysts had estimated a number at the low end of that range, data compiled by Bloomberg show.

Have a wonderful evening everyone.

Be magnificent!

The like and dislike is the result of my culture, my training, my associations,

my inclinations, my acquired and inherited characteristics.

It is from that center that I observe and make my judgments,

and the observer is separate from the thing he observes.

Krishnamurti, 1895-1986

As ever,

Carolann

If the wind will not serve, take to the oars.

-Latin Proverb

Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7