May 20th 2011, Newsletter
Dear Friends, A long weekend to enjoy….hope you are all having a wonderful time. We went to see The Magic Flute on Saturday night and it was wonderful. That was the last opera for Seattle opera’s 2010-2011 season. And of course, the best thing of all – the world didn’t end!
David Letterman
Ladies and gentlemen, hate to be the guy, and I’m sorry about this, but we have hit, the United States of America, has hit the debt ceiling. You know what that means? Neither do I.
A lightning strikes the watchtower on Petrin hill in Prague on Friday, May 20th, 2011.
Magdalena Strakova/AP
photo of the day
May 22, 2011
A pile of clothes is left on a sidewalk in Seattle’s Wedgewood neighborhood. The beginning of the end of the world was scheduled to begin at 6 p.m. on Saturday. Radio minister Harold Camping has advertised the rapture with billboards and a media campaign. Some have poked fun at the prediction with parties and pranks, such as this pile of clothes and sign.
Joshua Trujillo/seattlepi.com/AP
Market Commentary:
Canada
By Matt Walcoff
May 20 (Bloomberg) — Canadian stocks rose for a fifth day, capping its biggest weekly gain in three months, as gold rallied after Fitch Ratings cut Greece’s credit rating and natural gas rebounded from a five-week low.
Encana Corp., Canada’s largest natural gas producer, gained 2.3 percent as the fuel advanced on forecasts for warmer weather in the U.S. Goldcorp Inc., the world’s second-largest gold producer by market value, increased 1.4 percent as the metal climbed to a one-week high. Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer by market value, fell 2.6 percent as wheat dropped because of forecasts for rain in dry areas of Europe.
The Standard & Poor’s/TSX Composite Index climbed 27.18 points, or 0.2 percent, to 13,652.27. For the week, the S&P/TSX rose 2.1 percent.
“The global economic data is softer but still positive,” said Philip Petursson, managing director of the Portfolio Advisory Group at Manulife Asset Management, a Manulife Financial Corp. unit that oversees $217 billion. “Valuations and earnings growth in the U.S.” are also favorable.
Nine of 10 S&P/TSX industry groups gained this week as the lowest prices relative to earnings in six months attracted investors back into Canadian stocks. The S&P/TSX’s 3.5 percent quarterly decline through yesterday was the third-most among developed-market stock benchmarks behind the Austrian Traded Index and the Athens Stock Exchange General Index.
S&P/TSX financial, consumer-staples and technology stocks advanced the most this week in three months and an index of pipeline companies surged the most in 19 months. Utility and telecommunications stocks both climbed for a fifth week.
The S&P/TSX Energy Index gained as natural gas jumped 3.3 percent and oil rose 1.2 percent. Encana advanced 2.3 percent to C$32.60. Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, increased 0.7 percent to C$40.88.
Crew Energy Inc., a western Canadian oil and gas producer, rallied 6.9 percent to C$15.72 after Kim Page, an analyst at Wellington West Capital Markets Inc., raised her rating on the shares to “strong buy” from “buy.”
Trilogy Energy Corp., which also produces oil and gas in Canada, surged 13 percent to a five-year high of C$25.81 after its first-quarter cash flow topped the average analyst estimate by 10 percent. At least five analysts raised their price forecasts for Trilogy shares.
Gold gained 1.1 percent, the most in three weeks, after Fitch cut Greece’s credit rating to B+ from BB+, saying a restructuring of the country’s debt would be considered a default. The S&P/TSX Gold Index climbed for a sixth day, the longest streak since August.
Goldcorp rallied 1.4 percent to C$47.50. Silver Wheaton Corp., Canada’s fourth-biggest precious-metals company by market value, advanced 1.9 percent to C$34.17 as silver rallied. Alacer Gold Corp., which mines in Turkey, climbed 5.7 percent to C$8.76.
Fertilizer producers retreated as wheat dropped for a second day. Potash Corp. decreased 2.6 percent to C$50.58. Agrium Inc., Canada’s second-biggest fertilizer producer, fell0.8 percent to C$77.85.
Sino-Forest Corp., a forest-products company that operates in China, lost 4.3 percent to C$20.33. China’s power shortage may cut economic growth by 0.4 percentage points this year, Lu Yanjin, an analyst at Fuzhou, China-based Industrial Securities Co., wrote in a report today.
New Millennium Capital Corp., which is developing an iron ore project in Quebec, soared 15 percent to C$2.95 after ArcelorMittal said it will spend C$2.1 billion ($2.2 million) to raise output at its nearby Mont-Wright mine.
US
By Whitney Kisling
May 21 (Bloomberg) — U.S. stocks declined for a third straight week, the longest slump since August, as investors grew more concerned that Greece will default on its debt and reduced earnings forecasts undermined confidence in the economy.
Staples Inc. and Gap Inc. led losses in the Standard & Poor’s 500 Index after cutting their profit projections, while Hewlett-Packard Co. plunged 11 percent as it reduced its sales forecast. NYSE Euronext sank 13 percent after Nasdaq OMX Group Inc. said it was dropping a takeover bid for the operator of the New York Stock Exchange. Newfield Exploration Co. and El Paso Corp. led energy stocks to the biggest gain among 10 groups.
The S&P 500 lost 0.3 percent to 1,333.27 this week. The index has fallen every week in May after reaching an almost three-year high at the end of April. The Dow Jones Industrial Average fell 83.71 points, or 0.7 percent, to 12,512.04.
“People are realizing that not only the U.S. but the global economy still faces some issues,” said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. “You’ve still got problems particularly in Greece that aren’t going to go away soon. The market had gotten a little ahead of itself.”
While the S&P 500 is up 6 percent so far in 2011, the benchmark index for U.S. equities has lost 2.2 percent this month. The S&P 500 has only fallen one month so far this year, slipping 0.1 percent in March amid concern that Japan’s earthquake and tsunami would curb global demand.
Staples slipped the most in the S&P 500, losing 19 percent $16.37. The office-supply retailer forecast 2011 earnings wouldn’t exceed analysts’ average estimate, according to data compiled by Bloomberg.
Gap, the largest U.S. apparel chain, dropped 17 percent to $19.22 and had the worst daily decline in almost a decade yesterday. The company cut its full-year profit forecast by 22 percent as costs to make clothes rose faster than expected.
NYSE Euronext plunged as smaller competitors Nasdaq OMX and IntercontinentalExchange Inc. withdrew their bid for the New York-based company after the U.S. Department of Justice threatened a lawsuit. The shares lost 13 percent to $35.76.
S&P 500 technology companies slid the most among 10 groups this week, dropping 1.5 percent for the third straight week of losses. Hewlett-Packard, the biggest personal-computer maker, fell the most among technology shares after it cut a billion dollars from its sales forecast for 2011 and missed analysts’ profit projections. The shares slid 11 percent to $35.98.
KLA-Tencor Corp. lost 7.3 percent to $41.20. The semiconductor company, along with Intel Corp. and Applied Materials Inc., was downgraded by Goldman Sachs Group Inc., which cited increased competition from tablet computers and excess supply.
Energy shares in the S&P 500 rose 0.9 percent as a group this week, after losing 8.3 percent in the first two weeks of May. Oil climbed above $100 a barrel on May 18 after an Energy Department report showed an unexpected drop in U.S. inventories as refineries bolstered operating rates and imports declined.
Crude gained again on May 20 after the American Petroleum Institute said fuel consumption increased in April.
Newfield Exploration, an oil and gas producer which operates in the Gulf of Mexico, onshore U.S., Malaysia and China, advanced 6.9 percent. El Paso, which operates natural-gas pipelines, rose 6.4 percent.
Salesforce.com Inc., the largest supplier of customer- management software, advanced 8.7 percent to $146.61 for the best weekly gain since November. The company, which sells cloud- computing applications that companies rent over the Web rather than install on their computers, forecast fiscal second-quarter sales and profit that topped estimates as the company added 5,400 customers in last quarter.
The S&P 500 started the week lower on May 16 as concern about Europe’s debt crisis was heightened after Greece sought additional bailout funds. European finance chiefs endorsed a 78 billion-euro ($111 billion) bailout for Portugal. Authorities stepped up the pressure on Greece to sell assets and deepen spending cuts to win an increase of its 110 billion-euro aid package and more time to repay the loans.
“Some degree of caution might be in order in the near- term, while we wait for greater clarity on a series of risks in the weeks ahead,” said David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc., which oversees $693 billion in assets. “Recent evidence suggests a bit of softness in the U.S. economy.”
While a government report showed that fewer Americans than estimated filed applications for unemployment benefits during the previous week, other data showed manufacturing in the New York and Philadelphia regions expanded at a slower-than-forecast pace. Housing starts and existing home sales also unexpectedly decreased.
The S&P 500 was poised to gain for the week after the Federal Reserve signaled continued low interest rates on May 18.
Talks about an exit strategy from the record stimulus measures don’t mean monetary tightening “would necessarily begin soon,” according to the Fed’s April policy meeting records, released last week. Gap’s forecast and Fitch’s downgrade of Greece brought the index lower for the week yesterday.
The S&P 500 has climbed 27 percent since Fed Chairman Ben S. Bernanke signaled in August that he would buy more bonds to stimulate the economy. The Fed’s second program of quantitative easing, or QE2, which was officially announced in November, ends in June.
Joy said the approaching end of the Fed’s quantitative easing “raises uncertainty” about its role in the S&P 500’s direction.
Have a wonderful day.
Be magnificent!
Very few people in this world can reason normally.
There is a terrible tendency to accept all that is said, all that is read, and to accept it without question.
Only he who is ready to question, to think for himself, will find the truth!
To understand the currents of a river,
he who wishes to know the truth must enter the water.
-Nisargadatta, 1897-1981
As ever,
Carolann
Life is a rich strain of music,
suggesting a realm too fair to be.
-George William Curtis, 1824-1892
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor