May 4, 2023 Newsletter

Dear Friends,

Tangents: Happy Friday Eve.

1626: Dutch explorer Peter Minuit landed on what is now Manhattan. Go to article >
1959: The Grammy is presented for the first time.  It is one of the most prestigious awards in the music industry.  Winners of the first edition included Ella Fitzgerald, Henry Mancini and Frank Sinatra.
1886: Haymarket Square riot.

Horace Mann, educator, b. 1796.
Jane Jacobs, urbanist, b. 1916.
Audrey Hepburn, actress, b. 1929.

Google rolls out an alternative to the password.  Are you bad at picking passwords? Or maybe you use the same one for multiple devices and websites? Google hopes to end that with the introduction of passkeys.

Astronomers observe star swallowing planet for first time.  The planetary demise took place 12,000 light-years away from Earth — a fate that awaits our planet in about 5 billion years, researchers say.

Europe enters the hypersonic plane race.  Frankfurt to Dubai in 90 minutes? Yes, please. A startup company is hoping to operate commercial flights at five times the speed of sound by the 2030s.

462 million-year-old fossilized eyes and brains uncovered in ‘secret’ Welsh fossil site
An “extraordinary” secret fossil spot in Wales contains the preserved eyes and brains of 462 million-year-old creatures hidden amidst a hoard of unknown species. Read More

Ancient Roman camps from secret military mission spotted using Google Earth
Three ancient Roman camps in the Jordanian desert have been discovered by an archaeologist using satellite images from Google Earth. Read More

How to see the full ‘Flower Moon’ eclipsed by Earth’s shadow this weekend
This weekend, the full “Flower Moon” will move through part of Earth’s shadow and be eclipsed for a few hours. The event will be visible to more than 6.6 billion people. Read More

25,000-year-old human DNA discovered on Paleolithic pendant from Siberian cave
Researchers have retrieved human DNA from a Paleolithic pendant and discovered that it belonged to a Siberian woman who lived roughly 25,000 years ago. Read More

Marijuana can increase schizophrenia.
PHOTOS OF THE DAY

Jiuquan, China
Tourists ride camels around Echoing Sand Mountain and the Crescent Spring scenic area in Gansu province.  Photograph: VCG/Getty Images.

Schuylkill Haven, Pennsylvania
A swan and her cygnets in Bubeck park.  Photograph: Jacqueline Dormer/AP.

Buriticupu, Brazil
Lack of urban planning and aggressive deforestation have caused erosion that is driving the small town of Buriticupu in the north-eastern state of Maranhão towards gradual collapse, experts say.
Photograph: Nelson Almeida/AFP/Getty Images
Market Closes for May 4^th, 2023

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1979, the first modern leveraged buyout using high-yield junk bonds—a $381 million deal to take Houdaille Industries private—was completed by Kohlberg, Kravis, Roberts & Co. Over the next six years, Houdaille produced a 33.9% average annual return for KKR’s institutional investors.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell for the fourth day, dropping 0.6%, or 116.49 to 20,238.19 in Toronto.
The index dropped to the lowest closing level since April 6.
Today, financials stocks led the market lower, as 10 of 11 sectors lost; 163 of 232 shares fell, while 69 rose.
Nutrien Ltd. contributed the most to the index decline, decreasing 6.3%.
Bausch Health Cos. had the largest drop falling 20.3%.
Insights
* So far this week, the index fell 1.9%, heading for the biggest decline since the week ended March 17
* The index declined 4.5% in the past 52 weeks. The MSCI AC Americas Index lost 6.3% in the same period
* The S&P/TSX Composite is 4.6% below its 52-week high on May 4, 2022 and 13.2% above its low on Oct. 13, 2022
* The S&P/TSX Composite is down 1.4% in the past 5 days and was little changed in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 13.2 on a trailing basis and 13.5 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.2% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.24t
* 30-day price volatility rose to 8.55% compared with 8.41% in the previous session and the average of 10.76% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | -81.8224| -1.3| 4/25
Industrials | -45.1145| -1.6| 2/25
Energy | -21.5408| -0.6| 20/20
Consumer Discretionary | -17.9951| -2.4| 2/13
Consumer Staples | -13.0891| -1.5| 1/10
Communication Services | -12.7578| -1.4| 0/5
Materials | -6.4502| -0.2| 26/24
Utilities | -4.8001| -0.5| 4/12
Real Estate | -3.9067| -0.8| 5/16
Health Care | -3.5897| -4.9| 2/4
Information Technology | 94.5680| 6.9| 3/9
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
Nutrien | -20.7800| -6.3| 60.4| -13.4
Bank of Montreal | -18.9800| -3.3| 15.3| -6.7
RBC | -17.8100| -1.4| -64.6| 1.5
Barrick Gold | 4.8960| 1.5| 99.0| 19.0
Agnico Eagle Mines | 9.0950| 3.4| 21.6| 16.2
Shopify | 121.3000| 23.2| 175.4| 65.2
US
By Rita Nazareth
(Bloomberg) — A fresh rout in regional banks roiled trading desks around the globe, with brewing anxiety about the next financial shoe to drop making traders increase their bets on Federal Reserve
interest-rate cuts.
Apple Inc. climbed in late trading after revenue beat estimates.
Another unsettling round of trading halts in the financial industry hit Western Alliance Bancorp and PacWest Bancorp this time amid losses that topped 60% for each stock.
The rout engulfed several other lenders — big and small — with First Horizon Corp. down over 30% after its merger with Toronto-Dominion Bank was scrapped.
A probe into Goldman Sachs Group Inc.’s role in Silicon Valley Bank’s deal also weighed on sentiment.
All 21 shares in the KBW Bank Index of financial heavyweights such as JPMorgan Chase & Co. and Bank of America Corp. retreated.
The $2.5 billion SPDR S&P Regional Banking exchange-traded fund closed at the lowest since October 2020.
The rout in banks kept a lid on the broader market, with the S&P 500 suffering its fourth straight decline.
Wall Street’s fear gauge, the Cboe Volatility Index (VIX) spiked, reaching the key 20 mark.
That’s a stark contrast with the calm that prevailed in markets for the most part in April and saw the measure below 16 just last week.
That also all shows how investor confidence remains fragile after a string of bank failures and despite Fed Chair Jerome Powell’s Wednesday assurance that authorities were closer to containing the crisis. Smaller lenders are under pressure after a year of rate hikes hammered the value of their bond holdings and drove unrealized losses to an estimated $1.84 trillion.
“The acute phase of bank turmoil may not be over, and policymakers need urgently to recognize that,” said Krishna Guha, vice chairman at Evercore ISI. “The problem is that their financial stability policy options are limited.”
In such a stressful scenario, some lenders have been trying to assuage investors — with little to no avail.
PacWest Bancorp tumbled 51% even after saying core deposits have increased since March and confirming it’s in talks with several potential investors.
Western Alliance also pared losses, but was down 39% despite its denial that the firm is exploring strategic options including a possible sale of all or part of its business.
“Obviously a rough day today — we’re having the latest flare-up in what is slowly becoming a crisis of confidence in the regional-banking sector here in the United States,” said Jim Smigiel, chief investment officer at SEI. “We have recommended additional cash allocations out of equities for our clients.”
That said, Smigiel and a myriad of market observers don’t see the parallels being made in what we’re going through today versus the 2008 financial crisis.
“It’s not a credit crisis, it’s an interest-rate issue,” he noted. “This is just rates have gone up so quickly the valuation of their asset book has declined.”
The recent collapse of First Republic Bank and a raging selloff in regional banks has also bolstered fears of a lending crunch that could spur a hard landing.
For firms with shakier finances that often borrow money not only through banks but also with high-yield debt, signs of stress in the system may inflict even more pain.
“Companies with the highest level of leverage aren’t necessarily the most prudent ones, so if we see a pullback in bank lending, they become harder to underwrite,” said Max Gokhman, head of MosaiQ Investment Strategy at Franklin Templeton Investment Solutions. “Investors recognize that if rates go down, they may not necessarily go down for the most-indebted companies and they may have a hard time getting additional financing when they need it most.”
That’s a tricky scenario for a central bank that just raised rates to the highest level since 2007, signaled a potential pause as early as June, but refrained from hinting at a pivot at this stage.
Bond traders eyeing the deepening rout in US regional bank shares concluded the Fed is likely to reverse this week’s quarter-point interest-rate increase by July in response to tightening credit conditions.
Swap contracts linked to Fed meeting dates collapsed, with the July rate briefly falling to 4.82%, a quarter point below the 5.08% level where the effective fed funds rate is likely to settle as a result of Wednesday’s increase in the target band to 5%-5.25%.
The June swap rate at lows around 5% reflected one-in-four odds of a cut as soon as June.
Traders are also gearing up for Friday’s key jobs report, following data that showed applications for US unemployment benefits rose by the most in six weeks while continuing claims fell.
Even as the labor market starts showing some weakness, it’s still cooling at a much slower pace than other economic indicators in the wake of an aggressive tightening campaign by the Fed.
“In our view, the Fed is very unlikely to cut unless there’s severe financial stress and/or a recession is imminent — stocks likely go down in both scenarios,” said Chris Senyek at Wolfe Research.
Meantime, fears about a political standoff over the US debt limit are driving up rates on short-term Treasury bills, pushing them over 10-year yields by the most in at least three decades.
The risk that Congress will fail to act drove 3-month Treasury bill yields to over 5.25%, with them hitting as much as about 2 full percentage points over 10-year yields on Thursday.
That’s the most since the data compiled by Bloomberg began in 1992. 
Some of the main moves in markets:
Stocks
* The S&P 500 fell 0.7% as of 4 p.m. New York time
* The Nasdaq 100 fell 0.4%
* The Dow Jones Industrial Average fell 0.9%
* The MSCI World index fell 0.5%
Currencies
* The Bloomberg Dollar Spot Index fell 0.1%
* The euro fell 0.4% to $1.1014
* The British pound was little changed at $1.2574
* The Japanese yen rose 0.4% to 134.15 per dollar
Cryptocurrencies
* Bitcoin rose 1.3% to $28,890.52
* Ether rose 0.1% to $1,876.22
Bonds
* The yield on 10-year Treasuries advanced three basis points to 3.36%
* Germany’s 10-year yield declined six basis points to 2.19%
* Britain’s 10-year yield declined four basis points to 3.65%
Commodities
* West Texas Intermediate crude was little changed
* Gold futures rose 1% to $2,057.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Carly Wanna, Emily Graffeo and Peyton Forte.
Have a lovely evening.

Be magnificent!
As ever,

Carolann
Lost, yesterday, somewhere between sunrise and sunset, two golden hours, each set with sixty diamond minutes.
No reward offered, for they are gone forever. –Horace Mann, 1796-1859.

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