March 2, 2016 Newsletter

Dear Friends,

Tangents:

1729 – Louis XV authorizes new issue of playing card money in New France; not enough printed bills or coinage to pay the troops.

Off to the concert by the legendary Israeli-American violinist Itzhak Perlman at the Orpheum in Vancouver tonight…

PHOTOS OF THE DAY

A woman runs through an artwork created by artist Filippo Minelli, where he let off colorful smoke bombs in Somerset House’s courtyard, in London Wednesday. The piece is a new work in his series ‘Silence/Shapes.’ Photographs of similar performances will be shown at a new street art exhibition, ‘Venturing Beyond: Graffiti and the Everyday Utopias of the Street,’ which opens to the public on March 3. Kirsty Wigglesworth/AP

Singaporean artist Hafiz Osman rides past the skyline in his creation, consisting of a bicycle and a temporary shelter, entitled ‘Cycle House’ during a preview of the i Light Marina Bay sustainable light festival in Singapore Wednesday. Edgar Su/Reuters

A mountain hare sits in the snow in the Cairngorm mountains near Glenshee in Scotland Wednesday. Russell Cheyne/Reuters

Market Closes for March 2^nd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks staged an afternoon comeback to close higher, erasing a loss for the year that reached 9.9 percent at its trough, as a raw-materials and energy producers rebounded with commodities prices.

     The Standard & Poor’s/TSX Composite Index rose 0.3 percent to 13,017.93 at 4 p.m. in Toronto, reversing losses of 1 percent to cap a five-day rally that is the longest this year. The Canadian benchmark is the only market in the developed world to end Wednesday in positive territory. New Zealand’s index is flat for the year as the two measures vie for the top spot and outpace returns from markets in the U.S., U.K. and Germany.

     “The downdraft was quite overdone given what the fundamentals suggested,” said Craig Fehr, Canada market strategist at Edward Jones, in an interview last week as the S&P/TSX neared positive territory. His firm manages $876 billion. “The short-term rebound we’re seeing is quite warranted. We were getting volatility begetting volatility even when it wasn’t warranted. The rebound in crude has provided a nice floor. The worries have abated a bit.”

     Shares in the Canadian benchmark trade at about 20 times earnings, roughly 14 percent more expensive than the valuation of the Standard & Poor’s 500 Index, data compiled by Bloomberg show. Canada’s resource-rich index has benefited from a surge in the price of gold and crude’s rebound from a 12-year low.

     Canadian stocks have shown signs of breaking away from their lock-step relationship to crude oil, outperforming global peers this year after being among the worst performers in 2015. Energy producers rose 1.1 Wednesday as New York crude settled at a two-month high after a government report showed U.S. refineries boosted their use of oil.

     CCL Industries Inc., a packaging and label-maker, jumped 12 percent to a record after agreeing to buy Checkpoint Systems Inc. in a friendly deal worth about C$556 million. Checkpoint makes label products for the retail and apparel industry.

     Base metals producers First Quantum Minerals Ltd. and Teck Resources Ltd. surged at least 19 percent as raw-materials producers soared 3.9 percent as a group. Copper climbed to a three-month high. The industry is the best-performing group in the S&P/TSX this year with a 17 percent advance.

     Valeant Pharmaceuticals International Inc. rose 3.2 percent, snapping a four-day slide to rebound from a 2013 low. Shares of the drugmaker pared losses of as much as 11 percent yesterday after Nomura analyst Shibani Malhotra said Valeant was viewed with more confidence after conversations with the company. Malhotra maintained a buy rating on the stock. Shares of the drugmaker have plunged 74 percent from an August high amid intense scrutiny from investors and lawmakers over its pricing practices.

     Brookfield Asset Management Inc. and Manulife Financial Corp. slipped at least 1.3 percent to lead financial services stocks lower. Toronto-Dominion Bank and Bank of Nova Scotia each lost 0.3 percent.

     Canadian banks’ exposure to the struggling oil-and gas industry totals C$107 billion when including untapped credit lines with outstanding loans, double the C$50 billion generally highlighted by the big banks in quarterly earnings calls and presentations. The nation’s largest lenders reported mixed first-quarter earnings over the past week, with Royal Bank and Toronto-Dominion bank missing analysts’ estimates.

US

By Joseph Ciolli

     (Bloomberg) — U.S. stocks advanced, extending their eight- week highs, with banks and energy shares rallying for a second day as improving data bolstered optimism on the economy.

     Equities pressed higher in the final hour of trading after swinging between gains and losses for most of the session. Bank of America Corp. increased 2.1 percent to a one-month high, on top of a 5.4 percent gain yesterday, while Exxon Mobil Co. added 1.8 percent. Monsanto Co. fell the most in more than five years after cutting its profit forecast.

     The Standard & Poor’s 500 Index rose 0.4 percent to 1,986.45 at 4 p.m. in New York, holding at the highest since Jan. 6. The Russell 2000 Index of small caps jumped 1.1 percent. The Dow Jones Industrial Average added 34.24 points, or 0.2 percent, to 16,899.39, and the Nasdaq Composite Index increased 0.3 percent. About 8.3 billion shares traded hands on U.S. exchanges, in line with the three-month average.

     “It was the more cyclical businesses that bounced back today,” said Terry Morris, a senior equity manager who helps oversee about $3.2 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co. “The market ended up technically oversold a couple weeks ago, so the market was ripe to snap back, and we saw a continuation of that today. The fact that energy has stabilized has been enough to help the market turn up.”

     A report today showed companies in the U.S. added more workers than forecast to their payrolls, another positive signal on the economy after gauges showing stability at American factories, major carmakers and in the public and private construction industries helped spur a rally yesterday. The improving data has also raised the odds the Federal Reserve will boost borrowing costs this year.

     The S&P 500 has trimmed its 2016 decline to less than 3 percent, from more than 10 percent, amid a recovery from a 22- month low on Feb. 11. Banks, consumer and technology companies have helped boost the comeback. The benchmark is down 6.8 percent from an all-time high reached last May.

     The Chicago Board Options Exchange Volatility Index slipped 3.5 percent Wednesday to 17.09, with the measure of market turbulence known as the VIX dropping to the lowest level since Dec. 29.

     In Tuesday’s votes, Donald Trump and Hillary Clinton solidified their positions in the race to their parties’ presidential nominations. The impact on trading was muddied as global equities rebounded on the U.S. economic data and amid stability in China markets that spurred risk-taking.

     The eighth year of a presidency typically ranks last in terms of equity returns, and the first half of an election year is often even worse. Add everything else that has been weighing on markets in 2016, from China to oil and the Fed, and few money managers see a return to the relative calm that reigned from 2012 to 2015.

     “There will continue to be a lingering concern regarding who the Republican Party will nominate,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey via e-mail. “We expect as the months draw closer to the general election certain sectors performance will improve. Look for a bullish change in sentiment toward the health-care sector as jitters and uncertainty subside.”

     A Fed report today showed the U.S. economy continued to expand across most of the country, while wage growth was described as varying widely, “from flat to strong.” Seven of the Fed’s 12 regional districts characterized the economy as growing “moderately,” at a “modest pace” or “slightly,” according to the central bank’s Beige Book, an economic survey published eight times a year.

     Separately, San Francisco Fed President John Williams said today domestic demand is overwhelming weakness from abroad, and inflation should move back to the central bank’s 2 percent target over the next two years. Traders have raised the odds for rate increases this year, pricing in a 38 percent probability for a June boost in borrowing costs, up from about 26 percent a week ago. Chances for a December move have increased to 65 percent from 42 percent last Wednesday.

     “People were saying for a long time that while the stock market wasn’t doing well, the underlying economy was still doing well,” said Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research Inc. “We’re seeing proof of that now. It’ll be interesting to see if data continues to improve, and how that affects Fed decision-making. We’re starting to see people talk about an accelerated Fed rate hike schedule.”                      

     Eight of the S&P 500’s 10 main industries increased today, with energy and financial stocks gaining for a second straight day to lead the advance. Raw-material and consumer discretionary companies were the only two groups to decline.

     Energy companies in the benchmark stock index climbed 2.5 percent, the most in two weeks, to extend a two-day increase to 4.7 percent. Crude oil rose 0.8 percent to the highest in almost two months after a government report showed U.S. refineries boosted their use of crude. Marathon Oil Corp. and Devon Energy Corp. advanced more than 11 percent.

     Chesapeake Energy Corp. surged 23 percent, the most in more than seven years. Co-founder Aubrey McClendon, who was ousted three years ago, was killed in a car crash in Oklahoma City Wednesday, police said. His death comes a day after he was charged with rigging bids for oil and natural gas leases.

     Banks continued to recover from their lowest levels since 2013, with lenders in the S&P 500 up nearly 14 percent since Feb. 11. Citigroup Inc. and Wells Fargo & Co. gained at least 1.7 percent. The KBW Bank Index advanced 1.8 percent to an almost seven-week high.

     The S&P 500 Information Technology Index was little changed after erasing a 0.6 percent drop. EBay Inc. and Skyworks Solutions Inc. lost more than 2 percent. Even as Skyworks declined, an index of semiconductor companies in the benchmark increased 0.5 percent, with Micron Technology Inc.’s 5.5 percent gain.

     Materials shares in the benchmark index dropped 0.4 percent. Monsanto Co. plunged 7.8 percent to a five-month low after the world’s largest seed producer cut its full-year profit forecast. Chief Executive Officer Hugh Grant said the company may have to push back its long-term profit target to early in the next decade amid pressures from weak agricultural markets. Sherwin-Williams Co. and CF Industries Holdings Inc. declined at least 2.6 percent.

     Consumer discretionary companies closed little changed, paring a 0.8 percent slide. Dollar Tree Inc. fell 4 percent after its rating was cut to market perform from strong buy at Raymond James Financial Inc. The company has gained 28 percent since falling to a one-year low in October. Royal Caribbean Cruises Ltd. and AutoNation Inc. slipped more than 1.7 percent. Homebuilders Lennar Corp. and PulteGroup Inc. added at least 2 percent.

Have a wonderful evening everyone.

Be magnificent!

The golden rule of conduct therefore, is mutual toleration,

seeing that we will never think alike and we shall see the Truth

in fragments and from different angles of vision.

Conscience is not the same thing for all.

While, therefore, it is a good guide for individual conduct,

imposition of that conduct upon all will be an insufferable interference

with everybody’s freedom of conscience.

Mahatma Gandhi

As ever,
 

Carolann

The measure of life is not its duration, but its donation.

                                            -Peter Marshall, 1926-

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