May 15, 2024, Newsletter

Dear Friends,

Tangents:

May 15, 1940: The first McDonald’s fast food restaurant opens.
May 15, 1948:  Hours after declaring its independence, the new state of Israel was attacked by Transjordan, Egypt, Syria, Iraq and Lebanon. Go to article >>
Henry James, writer, b. 1843.

Atoms squished closer together than ever before, revealing seemingly impossible quantum effects
Using a clever laser technique, scientists have squished pairs of atoms closer together than ever before, revealing some truly mind-boggling quantum effects. Read More.

Tree rings reveal summer 2023 was the hottest in 2 millennia
Tree rings suggest the Northern Hemisphere summer of 2023 was the hottest in 2,000 years, with temperatures exceeding those of the coldest summer in the same period by 7 degrees Fahrenheit (3.9 Celsius).  Read More.

Heavy metals in Beethoven’s hair may explain his deafness, study finds
A DNA analysis of Ludwig van Beethoven’s hair shows that he likely had lead poisoning. Read More.

Sun launches strongest solar flare of current cycle in monster X8.7-class eruption
The strongest solar flare in half a decade just launched off the sun from the same sunspot group that triggered dazzling auroras last weekend. But don’t expect northern lights this time around. Read More.

‘Quantum-inspired’ laser computing is more effective than both supercomputing and quantum computing, startup claims
The desktop-sized LPU100 eschews traditional electronics and qubits in favor of lasers, and it can reportedly perform complex AI calculations in nanoseconds. Read More.

Little dog wins big at Westminster Dog Show
This adorable fluff ball won best in show at the 2024 Westminster Dog Show.

King Charles’ first official portrait since coronation proves divisive
An artist’s depiction of the British monarch is proving to be quite divisive with its fiery red background.

Recap of Caitlin Clark’s first WNBA game
Caitlin Clark scored 20 points and committed 10 turnovers in her first WNBA game as the Indiana Fever lost to the Connecticut Sun.

PHOTOS OF THE DAY

Sydney, Australia
A model rehearses ahead of the Romance Was Born show during the Australian fashion week presented by Pandora at Carriageworks
Photograph: Brendon Thorne/Getty Images for AFW

Mojokerto, Indonesia
Doves fly past a giant Buddha statue at the Maha Vihara Mojopahit temple ahead of the Vesak festival, which commemorates the birth, enlightenment and death of Buddha
Photograph: Juni Kriswanto/AFP/Getty Images

​​​​​​​Ajmer, India
An owl perches on a branch of a tree on the outskirts of the city
Photograph: Abaca/Rex/Shutterstock
Market Closes for May 15^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1911, the Supreme Court upheld the government’s decision to break up John D. Rockefeller’s Standard Oil on the grounds it was such a powerful monopoly that it violated the “rule of reason”.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite rose 0.2% at 22,284.76 in Toronto.
The move follows the previous session’s decrease of 0.1%.
Royal Bank of Canada contributed the most to the index gain, increasing 0.8%.
Orla Mining Ltd. had the largest increase, rising 9.2%.
Today, 122 of 223 shares rose, while 94 fell; 9 of 11 sectors were higher, led by financials stocks.
Insights
* The index advanced 8.5% in the past 52 weeks. The MSCI AC Americas Index gained 28% in the same period
* The S&P/TSX Composite is 0.8% below its 52-week high on May 10, 2024 and 19.2% above its low on Oct. 27, 2023
* The S&P/TSX Composite is little changed in the past 5 days and rose 2.5% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 18.5 on a trailing basis and 15.4 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.53t
* 30-day price volatility fell to 9.45% compared with 9.49% in the previous session and the average of 8.77% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | 19.5045| 0.3| 16/11
Information Technology | 16.2839| 1.0| 8/2
Utilities | 10.7646| 1.3| 11/4
Energy | 2.8302| 0.1| 21/19
Real Estate | 2.0792| 0.5| 11/8
Communication Services | 1.8706| 0.3| 2/3
Consumer Staples | 1.0964| 0.1| 3/7
Consumer Discretionary | 0.9441| 0.1| 6/7
Materials | 0.0517| 0.0| 32/16
Health Care | -1.0696| -1.7| 0/3
Industrials | -12.9438| -0.4| 12/14
================================================================
| | |Volume VS |
| Index | | 20D AVG |YTD Change
Top Contributors |Points Move| % Change | (%) | (%)
================================================================
RBC | 11.6100| 0.8| -49.4| 7.1
Shopify | 6.6750| 1.0| -23.7| -22.5
Element Fleet | 4.4640| 7.4| 101.2| 10.7
First Quantum Minerals | -4.6090| -4.8| -7.4| 71.4
Canadian Pacific Kansas | -6.5850| -0.9| -5.3| 4.9
Canadian National | -7.6390| -1.1| 44.2| 2.5
US
By Rita Nazareth
(Bloomberg) — Wall Street traders sent stocks to all-time highs as bond yields slumped after an inflation slowdown reinforced bets the Federal Reserve will cut interest rates as early as September.
The S&P 500 notched its 23rd record in 2024 as data showed the consumer price index cooled for the first time in six months.
Wall Street’s “fear gauge” — the VIX — sank to the lowest since January.
Treasuries climbed across the US curve.
Fed swaps priced in a faster pace of policy easing this year.
The dollar fell against all of its developed-market peers.
The latest inflation report may offer US policymakers hope that inflation is resuming its downward trend, which would help pave the way for rate cuts.
Separate retail sales data indicated some softening of the resilient consumer demand that’s been bolstering the economy.
“The market likes it,” said Gary Pzegeo at CIBC Private Wealth US. “The news on core inflation was better than expected.
Retail sales also showed some deceleration from the previously hot consumer sector. Taken together, this supports a Fed rate-cut in the fall.”
Most major groups in the S&P 500 advanced, with the gauge up 1.2% and topping 5,300. Nvidia Corp. led a rally in chipmakers.
Homebuilders jumped.
The meme rally that added about $11 billion in value to GameStop Corp. and AMC Entertainment Holdings Inc. fizzled out.
In late hours, Cisco Systems Inc. gave a bullish forecast.
Treasury 10-year yields sank 10 basis points to 4.34%. The
Bloomberg Dollar Spot Index hit a one-month low.
“Equity markets continue to show impressive resilience,” said Mark Hackett at Nationwide. “The sustainability of the recent rally will rely on the belief that we are heading for a ‘soft landing’ — with easing inflation and moderate growth.”
The so-called core CPI — which excludes food and energy costs — climbed 0.3% from March, snapping a streak of three above-forecast readings which spurred concern that inflation was becoming entrenched.
The year-over-year measure cooled to the slowest pace in three years.
“We see the April print as consistent with a direction of travel for inflation dynamics that – in the context of moderation in the real economy – can yield a September cut followed by a second in December,” said Krishna Guha at Evercore.
To Tom Essaye at The Sevens Report, the data show there’s still work to do on inflation, but most importantly it reminds investors disinflation is still occurring — and that will support stocks.
When taken together with the latest reading on producer prices, the report also bodes well for the Fed’s preferred inflation metric — the personal consumption expenditures price index.
Sonu Varghese at Carson Group says the gauge will likely come in softer than in the first quarter.
To Jason Pride at Glenmede, the CPI data is “a step in the right direction,” but the Fed will need to see several of those steps strung together before getting too excited about imminent rate cuts.
The next CPI figures will be released exactly on the same day when the Fed meets to decide on interest rates — June 12.
The data should begin to shift the narrative back towards “when” the Fed will cut in 2024 rather than “if” they will cut, said Josh Jamner at ClearBridge Investments.
To Chris Zaccarelli at Independent Advisor Alliance, the good news is that CPI hasn’t reaccelerated and the bad news is that consumers seem to be reducing their spending.
A number of weaker-than-estimated data points — from jobs to services and manufacturing — has recently sent the US version of Citigroup’s Economic Surprise Index to the lowest since January 2023.
The gauge measures the difference between actual releases and analyst expectations.
“Investors cheer rate cuts, neglect potential downturn,” said Jose Torres at Interactive Brokers.
Seema Shah at Principal Asset Management notes that cooling consumer spending is good, but if that transitions into a deeper slowdown, it could herald some economic problems that markets would not welcome.
“Both inflation and consumer spending appear to be cooling off, but at least so far, nothing in the data suggests that the economy is heading for a hard landing,” Brian Rose at UBS Global Wealth Management noted. “We maintain our view that the Fed will start cutting rates in September, and this should lead to lower bond yields by year-end.”
Following the report, swap markets are now pricing about two quarter-point Fed cuts by the end of 2024.
Wall Street also pared its expectations for inflation.
The five-year breakeven rate, which tracks yield differences between Treasuries and inflation-linked bonds, tumbled to the lowest since February.
Though markets appeared relieved that the closely-watched inflation data did not show a larger than expected increase, the data is still worrying since the US will need a more substantial deceleration in the prices of consumer goods before it considers easing policy,” said Tiffany Wilding at Pacific Investment Management Co.
“The data does not change our expectations that the Federal Reserve will delay rate cuts until it sees more sustained deceleration in inflation, which means in 2024 there’s a possibility that policy makers keep rates on hold,” she said.
Fed Bank of Minneapolis President Neel Kashkari repeated the central bank likely needs to keep rates at the current level for “a while longer,” and questioned how much they’re restraining the US economy.
A team led by Bank of America Corp.’s Michael Gapen is retaining its call for the first cut to be in December.
“We think inflation data will have to slow much more or the labor market data needs to weaken to really bring a September cut into play,” they wrote.
Fed Chair Jerome Powell recently described the labor market as “very strong” with signs of gradual cooling and re-balancing, in part driven by an increase in labor supply from immigration as well as an easing in demand. Powell also described current policy as restrictive by “many, many measures” but noted time will tell whether rates are sufficiently high to bring inflation back to the central bank’s 2% goal.
“One month does not a trend make, but the trend of moderating inflation and slowing in consumer spending is favorable for risk assets,” said George Mateyo at Key Wealth.
“All eyes will shift next to the labor market, which will likely set the course for the Fed in the weeks ahead.”
Inflation will continue to cool in the second quarter as lower energy prices feed into both headline and core inflation, said Jay Hatfield at Infrastructure Capital Advisors.
“We continue to believe that our 5,750 targets on the S&P will prove to be conservative as global rate cuts and AI propel global stock and bond markets higher after global cuts commence, with the ECB to act in early June,” he noted.
History reminds — but does not guarantee — that the S&P 500’s new high this year concludes the 62nd pullback (-5% to -9.9%) since World War II, according to Sam Stovall at CFRA.
That would open the door to a 5% to 10% advance over the coming three plus months — before the benchmark gauge endures another decline of more than 5%, he noted.
With the S&P 500 Index setting all-time highs, BMO Capital Markets is predicting even more gains through the end of 2024.
Brian Belski, the firm’s chief investment strategist, lifted his year-end forecast on the US equity benchmark to 5,600, the highest among Wall Street soothsayers tracked by Bloomberg.
The upgrade comes just two months shy of Belski reiterating his call for a drop to 5,100 on concern that the stock market had run up too far, too fast.
“It has become clear to us that we underestimated the strength of the market momentum,” he admitted Wednesday in a note to clients.

More Comments:
* Quincy Krosby at LPL Financial:
The Fed will certainly need a series of cooler reports for adjusting its rate easing timetable, but the CPI report suggests that the path towards 2% is a bit less bumpy.
* Cayla Seder at State Street:
This should be supportive of risk assets here. With that said, we’re not entirely out of the woods. We’ll likely need to see a continuation in data readings like today, but this could be the start of that trend.
* George Mateyo at Key Wealth:
One month does not a trend make, but the trend of moderating inflation and slowing in consumer spending is favorable for risk assets. All eyes will shift next to the labor market, which will likely set the course for the Fed in the weeks ahead.
* Chris Larkin at E*TRADE from Morgan Stanley:
No upside surprise this time. Today’s cooler CPI and retail sales data may make investors more hopeful the Fed will get in a cut or two before the clock runs out on 2024.
* Skyler Weinand at Regan Capital:
We’re still a far cry from the Fed’s desired 2% inflation level and the economy remains strong, so we’ll need a few more weak inflation prints to give the Fed the green light on lowering rates.
* Richard Flynn at Charles Schwab UK:
Although this will offer reassurance to markets after an unwelcome uptick in CPI figures last month, the figures are unlikely to prompt an imminent change in interest rates.
Patience has been the Fed’s core message lately. In the meantime, we watch and wait.

Corporate Highlights:
* Boeing Co. faces possible criminal prosecution after the US Justice Department found the company violated a deferred- prosecution agreement tied to two fatal crashes half a decade ago, intensifying the crisis engulfing the embattled US planemaker.
* Walt Disney Co. Chief Executive Officer Bob Iger said marketing expenses at the flagship Disney+ streaming service are too high and will be cut as the company seeks to make a profit in that business by the end of its fiscal year.
* Netflix Inc. will air two National Football League games this Christmas Day, in the streaming TV giant’s latest push into live events.
* Shareholders in BHP Group Ltd. and takeover target Anglo American Plc expect the world’s largest miner to come back with a third and improved proposal before a regulatory deadline next week, even after the smaller company laid out a bold restructuring plan of its own.
* The chances of Deutsche Bank AG carrying out a second share buyback this year have become slimmer, the German lender told investors just before its annual general meeting.
* Burberry Group Plc warned of a challenging first half after the British maker of pricey trench coats reported tumbling sales on weak demand in China and the US.

Key events this week:
* Japan GDP, industrial production, Thursday
* US housing starts, initial jobless claims, industrial production, Thursday
* Philadelphia Fed President Patrick Harker speaks, Thursday
* Cleveland Fed President Loretta Mester speaks, Thursday
* Atlanta Fed President Raphael Bostic speaks, Thursday
* China property prices, retail sales, industrial production, Friday
* Eurozone CPI, Friday
* US Conf. Board leading index, Friday

–With assistance from Natalia Kniazhevich, Alexandra Semenova
and Augusta Saraiva.

Have a lovely evening.

Be magnificent!
As ever,

Carolann
Forget not that the earth delights to feel your bare feet and the winds long to play with your hair. -Kahlil Gibran, 1883-1931.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com