May 2, 2013 Newsletter

Dear Friends,

Tangents:

May

-John Updike

Now children may

Go out of doors,

Without their coats,

To candy stores.

The apple branches

And the pear

May float their blossoms

Through the air…

On May 2^nd, 1519, artist Leonardo da Vinci died.

On May 2^nd, 1536, Henry VIII accused Anne Boyelyn of adultery and locks her in the Tower of London.

On May 2^nd, 1568 Queen Mary of Scotland escaped from Lock Leven Castle.

Photos of the day – May 2nd, 2013

A duck watches over her offspring as they feed at sunset on a lake in Bucharest, Romania. Vadim Ghirda/AP

A 16.5-meter (54-foot) high giant Rubber Duck created by Dutch artist Florentijn Hofman is towed along Hong Kong’s Victoria Habour. Since 2007 the Rubber Duck has traveled to various cites including Osaka, Sydney, Sao Paulo, and Amsterdam. Vincent Yu/AP

Market Closes for May 2^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

May 2 (Bloomberg) — Canadian stocks rose, erasing an earlier loss, as commodities prices rebounded and better-than- estimated earnings from Manulife Financial Corp. boosted financial shares.

Canadian Natural Resources Ltd. advanced 1.7 percent as crude rose the most in almost six months. Yamana Gold Inc. added 2.7 percent as gold gained the most in a week. Manulife Financial, the country’s largest insurer, climbed 3.9 percent after earnings beat estimates. Canadian National Railway Co. and Canadian Pacific Railway Ltd. increased more than 1.2 percent.

Catamaran Corp., a pharmacy services provider, slumped 7.2 percent after reporting sales that missed estimates.

The Standard & Poor’s/TSX Composite Index rose 58.35 points, or 0.5 percent, to 12,379.64 at 4 p.m. in Toronto. The benchmark equity gauge earlier fell as much as 0.4 percent.

Trading volume was 5.8 percent lower than the 30-day average.

“The TSX is going through a period of revaluing where commodities will trade,” said Kash Pashootan, a fund manager with First Avenue Advisory of Raymond James Ltd. in Ottawa. He manages about C$125 million ($124 million). “We’ve had a lot of good news overnight, we’ll see some days where the market bounces and buyers will step in and buy.”

Oil rose for the first time in three days and metals rallied as U.S. jobless claims unexpectedly dropped last week to the lowest since January 2008 and the European Central Bank cut interest rates to a record low today.

The Federal Reserve yesterday maintained the rate of bond buying and said it is “prepared to increase or reduce the pace of its purchases.”

Canada posted its first trade surplus in a year in March, breaking the longest string of deficits in at least 25 years as exporters shipped more energy and mineral products abroad.

The Bank of Canada said after the close of regular trading that Stephen Poloz, the chief executive officer of the nation’s export-financing agency, will replace Mark Carney as head of the central bank on June 3.

Canadian Natural Resources rose 1.7 percent to C$29.49 as crude for June delivery gained 3.3 percent to settle at $93.99 a barrel in New York, its biggest one-day increase since Nov. 6.

Yamana Gold added 2.7 percent to $11.97, rebounding from a 6.5 percent slide yesterday. Gold futures jumped 1.5 percent to settle at $1,467.60.

Financial stocks contributed most to gains in the S&P/TSX, rising 0.7 percent as a group.

Manulife Financial gained 3.9 percent to C$15.33. The company reported earnings of 28 cents a share, ahead of expectations for 27 cents a share. Sun Life Financial Inc. rose 2.3 percent to $28.97.

Industrial shares rallied 0.8 percent. Canadian National Railway rose 1.2 percent to $98.46 and Canadian Pacific Railway jumped 2.8 percent to $126.64.

Health care stocks slumped 3.7 percent, dragged lower by Catamaran. The company, based in Lisle, Illinois, dropped 7.2 percent to C$53.37, the biggest loss since October 2011. Sales of $3.22 billion fell short of the $3.53 billion analysts estimated.

Catamaran maintained its previous 2013 forecast for adjusted earnings of $1.81 to $1.88 per share and sales of $14.2 billion to $14.6 billion.

Goldcorp Inc., the biggest gold producer by market value, lost 0.6 percent to C$28.91 as earnings and output missed estimates. The company reported adjusted first quarter profit of 31 cents a share, trailing the 38-cent average of 21 analyst estimates according to a Bloomberg survey. Sales fell to $1.02 billion from $1.21 billion.

The company produced 614,600 ounces of gold in the quarter, short of the average of five estimates at 624,600 ounces.

US

By Lu Wang and Inyoung Hwang

May 2 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record high, as the European Central Bank cut its key interest rate and American jobless claims unexpectedly fell.

Chevron Corp. and Caterpillar Inc. rallied more than 1.4 percent to pace gains in the Dow Jones Industrial Average.

Facebook Inc. added 5.6 percent as the operator of the world’s largest social network reported sales that topped projections.

General Motors Co. rose 3.3 percent as it narrowed its loss in Europe. MetLife Inc. and Prudential Financial Inc. climbed more than 4.1 percent after the insurers’ earnings beat forecasts.

The S&P 500 rose 0.9 percent to 1,597.59 in New York, erasing yesterday’s drop. The Dow gained 130.63 points, or 0.9 percent, to 14,831.58. About 6 billion shares traded hands on U.S. exchanges today, 4.7 percent below the three-month average.

“The ECB did the minimum it needed to do,” Michael Strauss, who helps oversee about $25 billion of assets as chief investment strategist at Commonfund Group in Wilton, Connecticut, said by telephone. “Are they way behind the curve? Yes, but it at least showed that they’re recognizing the economic deterioration in the euro zone. The announcement was widely expected but on the margin it provided some help and the jobless claims data provided some help.”

ECB policy makers meeting in Bratislava lowered the main refinancing rate to 0.5 percent from 0.75 percent, a move predicted by 45 of 70 economists in a Bloomberg News survey.

“Our monetary policy will remain accommodative for as long as needed” and officials “will monitor very closely all incoming information” in the months ahead, ECB President Mario Draghi said at a press conference. He said the ECB will continue to lend banks as much money as they need at least until mid-2014.

Stock futures pared gains early in the day after Draghi said policy makers had an open mind on a negative deposit rate.

The S&P 500 lost 0.9 percent yesterday, the biggest drop in two weeks, as U.S. payrolls and manufacturing grew less than forecast. The bull market has entered its fifth year as the S&P 500 surged 136 percent from a 12-year low in 2009, driven by better-than-expected corporate earnings and three rounds of bond purchases by the Federal Reserve.

The Fed said yesterday it will keep buying bonds at a monthly pace of $85 billion while standing ready to raise or lower purchases as the economy changes.

The number of Americans filing claims for jobless benefits unexpectedly dropped to the lowest level in more than five years, according to Labor Department figures. Other data today showed the productivity of U.S. workers rose in the first quarter as companies focused on containing labor expenses.

A report tomorrow is projected to show U.S. unemployment stayed at 7.6 percent in April, while payrolls rose 145,000, compared with an increase of 88,000 the prior month, according to the median estimates of economists in a Bloomberg survey.

“The key thing that you need to make people feel OK is to simply add jobs and ideally lower the unemployment rate,” Ethan Anderson, senior portfolio manager for Rehmann Financial in Grand Rapids, Michigan, said by phone. His firm manages about $2 billion. “It’s looking like the goldilocks type of scenario where the economy grows, but not too fast for the Fed to stop helping, but not too slow to impede earnings growth.”

Of the 384 companies in the S&P 500 that have reported results so far, 73 percent exceeded analysts’ earnings predictions while 53 percent missed on sales, data compiled by Bloomberg show. Profit at S&P 500 companies rose 1.1 percent in the first three months of the year, according to estimates compiled by Bloomberg.

Nine out of the 10 industry groups in the S&P 500 advanced today as technology, energy and industrial companies rose the most, climbing at least 1.2 percent.

The Morgan Stanley Cyclical Index added 0.9 percent and the Dow Jones Transportation Average increased 1 percent. An S&P gauge of homebuilders jumped 3.5 percent.

Chevron, the second-largest U.S. energy company, gained 1.5 percent to $122.04. Caterpillar, the biggest maker of mining machinery, climbed 1.4 percent to $84.26.

Facebook advanced 5.6 percent to $28.97. First-quarter sales surged 38 percent to $1.46 billion, a sign that Chief Executive Officer Mark Zuckerberg is making headway in a drive to make more money from mobile advertising. Profit excluding certain items was 12 cents a share, compared with an average analyst prediction of 13 cents.

General Motors gained 3.3 percent to $31.16. The automaker, after losing more than $18 billion in Europe since 1999, narrowed its first-quarter loss in the region, outpacing Ford Motor Co. and helping it beat analysts’ earnings estimates.

MetLife added 4.1 percent to $39.97. The largest U.S. life insurer reported a first-quarter profit compared with a year- earlier loss as Chief Executive Officer Steven Kandarian expands outside the U.S. Kandarian is searching for customers in faster- growing economies and reducing expenses as slow expansion in the company’s main markets weighs on results.

Prudential rose 7 percent to $63.41. The No. 2 U.S. life insurer also posted results that exceeded analysts’ estimates.

Visa Inc. climbed 5.7 percent to a record $175.40. The biggest payments network posted a quarterly profit that beat analysts’ estimates as spending on credit and debit cards rose.

Gilead Sciences Inc. rose 4.1 percent to $52.18. The company is moving its experimental drug combination against hepatitis C into a late-stage trial after it cured 95 percent of patients who used the medicine for eight weeks.

Expeditors International of Washington Inc. climbed 4.8 percent to $37.03. The manager of cargo ships posted a second consecutive quarterly increase in airfreight tonnage during the first three months of the year and said the company had “a strong finish” in March.

“After having swum in deep waters for so long, it’s somewhat invigorating to feel that your feet might actually be touching ground,” Chairman and Chief Executive Officer Peter J. Rose said in a statement.

Seagate Technology Plc gained 7.3 percent to a record $39.63. The maker of computer disk drives reported fiscal third- quarter profit and sales that exceeded analysts’ forecasts.

International Paper Co. slipped 3.5 percent to $44.27. The world’s largest maker of office paper reported operating profit of 65 cents a share in the first quarter. That trailed the average analyst estimate of 74 cents in a Bloomberg survey.

The Chicago Board Options Exchange Volatility Index, or VIX, slid 6.2 percent to 13.59 as investors cut demand for protection against losses in the S&P 500. Historical relationships between U.S. equity and options prices have come under increasing strain in the past week, with the rally in the S&P 500 awakening demand among both speculators and hedgers.

The VIX moved in the same direction as the S&P 500 for four straight days through April 29, including three advances and one drop. That’s the longest stretch of lockstep moves since February 2007, data compiled by Bloomberg show. The indexes swing in the opposite direction about 80 percent of the time.

Options prices usually fall when equities gain because the optimism driving share prices reduces the demand for protection against losses. That relationship is wavering as traders become less certain about the direction of stocks after a four-year, 134 percent advance, according to Andrew Greeley, a senior managing director at Stamford, Connecticut-based Acorn Derivatives Management Corp. Dealers are charging bears more for insurance and bulls more to speculate on gains.

“Normally we would expect to see the VIX continue to slide lower as the S&P 500 grinds up,” Greeley, who helps manage more than $450 million in volatility assets, said yesterday in an interview. “But as we get more extended in the recent trend and approach significant economic reports and central bank meetings, the VIX is capturing greater interest in out-of-the-money options, both calls and puts, as people bet on more stock gains as well as buy hedges.”

Have a wonderful evening everyone.

Be magnificent!

All humanity shares the sunlight;  that sunlight is neither yours nor mine.

It is the life-giving energy, which we all share.

The beauty of a sunset, if you are watching it sensitively, is shared by all human beings.

Krishnamurti, 1895-1986

As ever,

Carolann

Only through imitation do we develop

toward originality.

-John Steinbeck, 1902-1968

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7