March 15, 2016 Newsletter

Dear Friends,

Tangents:

We attended a splendid performance of Gaetano Donizetti’s opera, Mary Stuart, in Seattle last Saturday evening.  Seattle Opera continues to inspire under general director Aidan Lang.   To note, the final opera of the season will take place from May 7^th – May 25^th, and will be The Flying Dutchman.  It is not to be missed if at all possible because the Dutchman will be performed by the celebrated bass-baritone Greer Grimsley who is sure to fascinate once again.  I’ve encountered fans from as far away as Europe – chatting at intermissions – who travelled to Seattle, just to see Greer Grimsley performing in  Wagner’s operas.  You can inquire about tickets at Seattle Opera at 206.389.7676.

1972 – “The Godfather,” Francis Ford Coppola’s epic gangster movie based on the Mario Puzo novel and starring Marlon Brando and Al Pacino, premiered in New York.

1975 – Greek shipping magnate Aristotle Onassis, the husband of former first lady Jacqueline Kennedy, died at age 69.

1967 – Parliament recommends Calixa Lavallée’s “O Canada” music as the National Anthem

PHOTOS OF THE DAY

A farmer harvests broccoli in the town of al-Ansariyeh south of Sidon, Lebanon, Tuesday. Ali Hashisho/Reuters

Girls dressed in traditional clothes wait for Camilla, the Duchess of Cornwall, at the State Stud Farm in Djakovo, Croatia, Tuesday. Antonio Bronic/Reuters

Market Closes for March 15^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell a second day as Valeant Pharmaceuticals International Inc. tumbled the most on record after giving its sales forecast missed estimates and the company warned it risked violating its debt terms.

     The Standard & Poor’s/TSX Composite Index declined 0.6 percent to 13,400.31 at 4 p.m. in Toronto, paring earlier losses of as much as 1.4 percent in afternoon trading as commodities producers reversed losses. The resurgent S&P/TSX is one of the best-performing developed markets in the world this year, vying with New Zealand for the top spot, while posting returns ahead of the U.S., Germany and U.K.

     Rallies among energy and materials producers have led to the annual gain, and shares in the benchmark S&P/TSX now trade at about 21.3 times earnings, roughly 17 percent more expensive than the valuation of the benchmark U.S. equity index, the Standard & Poor’s 500 Index, data compiled by Bloomberg show. 

     The rally paused Tuesday almost entirely because of a 51 percent rout in Valeant. The stock took 118 points off the index, which would have advanced if the drugmaker weren’t included. The Quebec-based company cut its 2016 forecast, reported a weak fourth quarter and said it risked breaching some of its debt agreements if it can’t file its annual report in time.

     Valeant, briefly the largest company in Canada by market capitalization last year, has lost more than three-quarters of its value from an August peak as regulators and investors have scrutinized its business practices. The company has also had to grapple with an extended medical leave from Chief Executive Officer Michael Pearson, who only returned recently, while pulling its financial guidance and delaying fourth-quarter results.

     Canadian shares joined a slump in global equities as investors were reminded that raw-material prices remain volatile amid uncertainty persists over stimulus efforts in Europe and economic growth in China. Oil dropped a second day as Russia signaled Iran won’t join major producers in freezing output to reduce a global glut.

     Energy producers rose 0.4 percent, rebounding from an intraday loss in the final hour of trading. Oil settled 2.3 percent lower in New York as Iran has “reasonable arguments” for not joining an alliance to cap output now, Russian Energy Minister Alexander Novak said after meeting with his Iranian counterpart.

     First Quantum Minerals Ltd. and Teck Resources Ltd. tumbled at least 4.4 percent as iron ore dropped a sixth day, reversing gains from a record spike, and copper led other base metals lower.

US

By Dani Burger

     (Bloomberg) — U.S. stocks slipped in light trading, with the Standard & Poor’s 500 Index posting back-to-back declines for the first time this month, as investors considered the capacity of central banks to boost global growth.

     The complexion of Tuesday’s retreat mirrored yesterday’s results, with commodity companies among the biggest losers, joined again by health-care and financial shares. Valeant Pharmaceuticals International Inc. plunged 51 percent after cutting its profit forecast. Apple Inc. added 2 percent amid positive analyst comments on iPhone sales, while baby formula maker Mead Johnson Nutrition Co. surged 11 percent on deal speculation.

     The S&P 500 declined 0.2 percent to 2,015.93 at 4 p.m. in New York, trimming an earlier 0.7 percent slide. The Dow Jones Industrial Average added 22.40 points to 17,251.53, after erasing a 108-point decline. The Nasdaq Composite Index slid 0.5 percent, while the Russell 2000 Index sank 1.6 percent. About 6.5 billion shares traded hands on U.S. exchanges, 26 percent below the 2016 average. Yesterday’s session saw the fewest shares traded this year.

     “The Fed is really the key this week,” said Bob Phillips, co-founder and managing principal at Indianapolis-based Spectrum Management Group Inc. “With January retail revised down, that’s going to be viewed as a negative because the question is, where is the consumer and why aren’t we seeing savings from low oil prices flow through to sales elsewhere? It probably causes the Fed to be much more cautious in announcing a rate increase because that’s a fundamental weakness in the economy.”

     U.S. equities retreated with shares in Asia and Europe after the Bank of Japan refrained from adding more stimulus. Central banks around the world have indicated a willingness to continue measures to support economic growth and stabilize markets, helping stocks rebound in the past month. The Federal Reserve kicked off a two-day policy meeting today, with investors tempering their trading before the outcome Wednesday afternoon.

     Traders are pricing in little chance of a rate increase, though bets for a boost later in the year have risen. The probability of a June move is now seen at almost 54 percent, from 2 percent a month ago.

     Fed officials have stressed that the pace of rate increases will be gradual and data-dependent. A report today showed retail sales dropped in February and the prior month’s gain was revised to a decline. Separate data showed wholesale prices fell last month, held down by lower fuel costs that have kept inflation languishing below the Fed’s goal.

     Another measure showed confidence among homebuilders held in March at a nine-month low as sales prospects waned, while other data indicated inventories at warehouses, stores and showrooms are not being drawn down amid tepid underlying demand.

     The S&P 500 has rebounded 10 percent since a Feb. 11 low, paring its 2016 drop to 1.4 percent, after concern over China’s economic slowdown and a deepening oil rout triggered losses of as much as 11 percent. The index is among the best-performing developed-market benchmarks tracked by Bloomberg this year.                          

     But while a gauge of investor anxiety hovers close to the lowest level of 2016, not all traders are convinced. The concern is visible in the record number of shares outstanding in an exchange-traded note betting on an increase in the Chicago Board Options Exchange Volatility Index, known as the VIX. The measure wiped out gains at the close, decreasing 0.5 percent today to 16.84, on the way to its first monthly decline since October.

     “All the concerns we had at the beginning of the year are still pretty much there,” said Kully Samra, who manages U.K. clients for Charles Schwab Corp. in London. “It’s all about how much central banks can reassure investors. Language has become a policy tool in itself — the way the Fed communicates with the market is going to be very important. The rebound has basically sent markets back to neutral territory.”

     Six of the S&P 500’s 10 main groups declined Tuesday, with health-care and raw-materials shares dropping more than 0.9 percent. Energy was little changed after erasing almost all of a 1.9 percent selloff. Technology stocks added 0.4 percent, while phone, utility and consumer staples companies edged higher.                       

     Fallout from Valeant’s tumble was palpable as declines among drugmakers dragged down the broader health-care group. Pfizer Inc. and Merck & Co. decreased at least 1.2 percent. The Nasdaq Biotechnology Index fell 3.9 percent, the most in two months. Mallinckrodt Plc dropped nearly 15 percent, while Endo International Plc plunged 23 percent, its worst slide in 12 years. The Russell 2000 Health-Care Index lost 4 percent, the biggest retreat in five weeks.

     Energy producers followed oil lower for a second day as Iran bolstered crude exports and Russia signaled the Persian Gulf nation won’t join major producers in freezing output to reduce a global glut. Chesapeake Energy Corp. sank 4.6 percent, trimming a drop of nearly 10 percent, after losing 6.8 percent Monday. Pipeline operator Kinder Morgan Inc. decreased 3.6 percent.

     Freeport-McMoRan Inc. fell 7 percent to lead raw-materials lower. The copper producer’s shares had rallied 40 percent since Feb. 25 through yesterday. Alcoa Inc. and CF Industries Holdings Inc. retreated more than 5.2 percent.

     Financials slipped for a second day. Jefferies Group reported a first-quarter loss as revenue from trading stocks and bonds tumbled 82 percent. Leucadia National Corp., which owns the firm, fell 5.7 percent, the most in three years. Also among the worst-performing financial companies, CBRE Group Inc. and Franklin Resources Inc. fell at least 3.3 percent.

     Gains in Apple and Hewlett Packard Enterprise Co. helped lift tech shares, as the companies advanced at least 2 percent. Apple rose to its highest price this year amid its longest rally in six months, as demand for its iPhone in the March quarter continues to grow, according to analysts at Morgan Stanley and Rosenblatt Securities Inc.

     The retailer group was little changed after the government’s monthly sales figures, though gains of 0.7 percent or less in Home Depot Inc., Amazon.com Inc. and Priceline Group Inc. helped offset steeper declines in a bevy of chain stores with lower weightings in the index. Kohl’s Corp. fell more than 3.6 percent, while Best Buy Co. and Macy’s Inc. dropped more than 1.7 percent.

Have a wonderful evening everyone.

Be magnificent!

The key to an easy relationship with other people is not to impose your ego,

nor to crush the ego of others.

Swami Prajnanpad

As ever,
 

Carolann

Time is what we want most, but what we use worst.

                                   -William Penn, 1644-1718

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