May 2, 2014 Newsletter

Dear Friends,

Tangents:

I am off to New York this weekend, one of my favorite places to be.  I became a member of MoMa a few years ago and one of the perks is early access to shows and early hour entry to the museum on certain days.  There is an exhibition starting next week but members can preview it tomorrow.  It is by Brazilian artist Lygia Clark;  the show is Lygia Clark: The Abandonment of Art, 1948-1988, which I am looking forward to seeing.  You can check it out on the MoMa website.

I’ll be attending the Sohn Investment Conference on Monday.  It should be an excellent conference this year with Bill Ackman, David Einhorn  and Dan Ariely among the speakers.  Check out the roster at sohnconference.org.  The conference honors the memory of Ira Sohn, 1964-1993, and all participants donate their time; all money raised is in support of pediatric cancer research.  Back on Tuesday.

Leonardo da Vinci died on this day in 1519~As a well spent day brings happy sleep, so a life well used brings a happy death. – Leonardo da Vinci.

Photos of the day

Cows graze in a field at sunset in Vilonia, Arkansas. Carlo Allegri/Reuters

Visitors ride a boat in the Chidorigafuchi moat, as they enjoy blooming cherry blossoms during spring in Tokyo, Saturday. Issei Kato/Reuters

Market Closes for May 2^nd, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Gerrit De Vynck

May 2 (Bloomberg) — Canadian stocks rose and the country’s benchmark index approached an all-time high after the U.S. saw its biggest monthly gain in employment in more than two years.

Torstar Corp. rallied 18 percent after saying it would sell its romance-novel publishing unit for C$455 million ($414.5 million). Sierra Wireless Inc. fell 8.7 percent after lowering its prediction for second quarter revenue. Constellation Software Inc. rose 2.7 percent as TD Securities raised its recommendation on the stock to buy from hold.

The Standard & Poor’s/TSX Composite Index gained 84.30 points, or 0.6 percent, to 14,748.37 at 1:08 p.m. in Toronto. The equity gauge is at its highest since June 2008 after capping a 10th month of gains in April. The U.S. added 288,000 non-farm jobs and the unemployment rate sank to 6.3 percent, outpacing economist estimates as the economy recovered from a colder-than- usual winter.

“It beat the consensus by about 70,000 jobs so that’s a very strong number,” said Luciano Orengo, a fund manager with Manulife Asset Management Ltd. in Toronto. “The Canadian economy does well because the U.S. is getting better,” said Orengo, who helps manage about C$1.4 billion ($1.3 billion).

Torstar climbed 18 percent to C$7.88, its biggest jump in three-and-a-half years. The owner of the Toronto Star newspaper is selling Harlequin Enterprises Ltd., the world’s biggest publisher of romance novels, to Rupert Murdoch’s News Corp.

Sierra Wireless fell 8.7 percent to C$22.10. The Richmond, British Columbia-based communications equipment company beat analyst estimates for first-quarter revenue but said second quarter earnings would be lower than expected. While Sierra Wireless operates in a growing market, it is facing a lot of competition, Orengo said.

“There’s a lot of companies that want to be in this space and when we sold Sierra Wireless that was sort of the thesis as to why, it was doing well but starting to catch these headwinds with competition,” Orengo said.

Constellation Software rose 2.7 percent to C$260.75. On April 30, the company reported first quarter earnings that missed analyst estimates while saying cash flow from operations increased year-over-year to $100 million from $34 million.

Nine of ten industries in the benchmark index rose, led by industrial and materials companies. West Texas Intermediate crude oil rose 0.4 percent to $99.81 a barrel and gold rose 1.3 percent to $1,300.50 an ounce.

Pattern Energy Group Inc., which owns wind power projects, fell 3.5 percent to C$28.37 after posting a first-quarter earnings loss. The company said today it will buy a wind farm in Texas for $125 million.

USA
By Lu Wang and Joseph Ciolli

May 2 (Bloomberg) — U.S. stocks fell, after an earlier rally sent the Standard & Poor’s 500 Index above its closing record, as concern about escalating tension in Ukraine overshadowed data showing payrolls rose the most in two years.

Health-care stocks dropped 0.8 percent, as Merck & Co., Pfizer Inc. and Johnson & Johnson lost more than 1.2 percent. LinkedIn Corp. declined 8.4 percent after giving a quarterly sales forecast that missed analysts’ estimates. Casino stocks rallied as Macau revenue topped forecasts.

The S&P 500 slipped 0.1 percent to 1,881.14 at 4 p.m. in New York, after rallying 0.4 percent earlier to climb above all- time high of April 2. The Dow Jones Industrial Average lost 45.98 points, or 0.3 percent, to 16,512.89. About 5.9 billion shares changed hands on U.S. exchanges, 12 percent below the three-month average.

“The end result is neutral but it’s the positive of the jobs numbers being offset by greater concerns about what’s going on in the Ukraine,” said John Manley, chief equity strategist at Wells Fargo Funds Management in New York, which advises $231 billion in the Wells Fargo Advantage Funds. “There’s more activity over there and that has the market a little bit worried. It’s something we will have to deal with for a while because I don’t see it going away right away.”

The United Nations Security Council held an emergency meeting on Ukraine today after the country sent armored vehicles and artillery to retake Slovyansk, defying a demand by Russian President Vladimir Putin to pull back troops. President Barack Obama and German Chancellor Angela Merkel set a May 25 trigger for possible economic sanctions against Russia.

Interior Ministry forces were dispatched at 4:30 a.m. local time to drive out militants and free hostages, including eight international monitors, minister Arsen Avakov said on Facebook. Rebels shot down two helicopters, killing two pilots, the Defense Ministry said.

“On a Friday, people are going to be more inclined to be less long going into a weekend with potential military action happening in the Ukraine,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “People don’t want to walk in Monday morning and be negatively surprised by a down market because of military action in Europe, so they’re selling off.”

Stocks rose earlier after data showed employers boosted payrolls in April by the most in two years and the jobless rate plunged to 6.3 percent as companies grew confident the U.S. economy is emerging from a first-quarter slowdown.

The 288,000 gain in employment was the biggest since January 2012 and followed a revised 203,000 increase the prior month that was stronger than first estimated, Labor Department figures showed. The median forecast in a survey of economists called for a 218,000 advance. Unemployment dropped from 6.7 percent to the lowest level since September 2008 as fewer people entered the labor force.

“It’s a pretty strong report that suggests the Fed will continue to taper,” Anthony Valeri, a market strategist with LPL Financial Corp. in San Diego, said in a phone interview. The firm oversees $350 billion. “This is the first strong confirmation we’re unwinding some of the winter weakness.”

The Federal Reserve said this week that the economy is perking up after stalling last quarter and the job market is improving. The Federal Open Market Committee pared its monthly asset-buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.

Gross domestic product rose at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, the Commerce Department said earlier this week.

Data this week showed consumers and companies were shaking off winter doldrums. Household purchases, which account for about 70 percent of the economy, climbed 0.9 percent in March, the most since August 2009, the Commerce Department said yesterday. Incomes increased by the most in seven months. Also yesterday, data from the Institute for Supply Management showed factories added employees in April at the fastest pace in four months. Manufacturing expanded the most this year.

A separate report today showed factory orders increased 1.1 percent in March, below economists’ forecast for a 1.5 percent advance.

The S&P 500 has climbed 1.8 percent this year, while the Dow is down about 0.4 percent. The S&P 500 was up 1 percent this week as company earnings from Merck to Sprint Corp. topped analyst estimates. The Dow closed at a record on April 30.

Chevron Corp. and Estee Lauder Cos. were among S&P 500 companies that reported earnings today. About 77 percent of those that have posted results this season have beaten analysts’ estimates, data compiled by Bloomberg show. More than 51 percent of them have topped sales projections, according to the data.

Six out of 10 major industries in the S&P 500 declined today, with utility shares falling 2 percent as a group.  Commodity shares had the largest gain, increasing 0.5 percent as metals rallied.

Health-care stocks dropped 0.8 percent. Pfizer lost 1.3 percent to $30.75. AstraZeneca Plc rejected Pfizer’s sweetened takeover proposal, saying the 63.1 billion-pound ($106.5 billion) offer fails to appreciate the value of the promising medicines under development by the U.K.’s second-biggest drugmaker.

Merck slipped 2.4 percent to $58.22. Johnson & Johnson retreated 1.2 percent to $99.31. The three companies accounted for the biggest declines in the Dow.

LinkedIn dropped 8.4 percent to $147.73, the lowest since Feb. 7. Second-quarter revenue will be $500 million to $505 million, the Mountain View, California-based company said in a statement yesterday. Analysts had estimated sales of $505.5 million, according to the average projection compiled by Bloomberg.

Casino companies rallied as April revenue from Macau rose 10.6 percent, beating the average analyst estimate for growth of 7 percent.

Wynn Resorts Ltd. added 7.3 percent to $221.68 after Wynn Macau Ltd.’s first-quarter profit also topped estimates. MGM Resorts International increased 4.3 percent to $26.49.

Estee Lauder climbed 4.8 percent to $75.62. The beauty- products maker raised its full-year forecast after fiscal third- quarter earnings beat analyst estimates.

U.S. stocks will fall 11 percent starting as soon as next week should some price patterns come true, according to Tom DeMark, the creator of indicators to show turning points in securities.

The S&P 500 will have peaked if it closes above 1,891 on one or two instances without also falling to 1,884 in intraday trading, DeMark said in a phone interview yesterday. He made similar statements in February, saying that if certain conditions were met, U.S. stocks had reached a point resembling the time before the 1929 market crash. The S&P 500 rallied 8 percent over the next two months.

Have a wonderful weekend everyone.

Be magnificent!

I am firmly of the opinion

that India’s salvation depends on the sacrifice and enlightenment of her women.

Mahatma Gandhi

1869-1948

As ever,

Carolann

A positive attitude may not solve all your problems,

but it will annoy enough people to make it worth the effort.

-Herm Albright, 1876-1944

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