November 13, 2015 Newsletter

Dear Friends,

Tangents:

Carolann is out of the office, I will be writing the newsletter on her behalf.

PHOTOS OF THE DAY

Ecuador’s Tungurahua volcano spews large clouds of gas and ash near Banos, Thursday. Tungurahua, which means ‘Throat of Fire’ in the local Quechua language, has been classified as active since 1999. Carlos Campana/Reuters

Hungary’s Zsolt Toth carves Star Wars character Darth Vader for the ice sculpture festival in Liege, Belgium, Friday. Eric Vidal/Reuters

Market Closes for November 13^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell an eighth day, the worst stretch for the resource-dominated market since before the financial crisis, amid a worsening outlook for global growth from Asia to Europe and the U.S.

     The Standard & Poor’s/TSX Composite Index slipped 0.4 percent, led by declines in the nation’s largest banks. Earlier advances in energy producers and health-care companies weren’t enough to maintain a brief midday rally as the index fell in the final hours of trading. 

     The equity gauge has lost 4.6 percent in eight days for the longest losing streak since June 2002. Natural-resource producers have slumped more than 5 percent over that period as the Bloomberg Commodity Index tracking prices from copper to crude fell to a 1999 low.

     Canadian equities have been among the worst-performing in the world this year, led by declines in natural-resource and health-care stocks, as the country’s stock market has been hampered by a slump in oil prices, slowing overseas growth and the prospect of an interest-rate hike from the Federal Reserve.

     “The market is looking for a stamp of approval,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto. His firm manages about C$5 billion. “Earnings have been mediocre. These very weak numbers make things more difficult for the Fed.”

     The S&P/TSX fell 51.78 points to 13,075.40 at 4 p.m. in Toronto. The benchmark equity gauge has lost 11 percent this year, trailing only Singapore and Greece among developed markets.

     Euro-area gross domestic product rose 0.3 percent in the third quarter, short of the median 0.4 percent analysts’ estimate in a Bloomberg survey. Meanwhile U.S. retail sales increased less than forecast in October as consumers pocketed money saved from cheaper gas. The data come after figures earlier in the week indicated imports in China, one of the world’s largest consumers of natural resources, had retreated on slowing demand from heavy industries.

     Energy producers rebounded from a six-week low, reversing earlier declines, led by gains from Encana Corp. to Enerplus Corp. of at least 7 percent. Drugmaker Concordia Healthcare Corp. jumped 16 percent to a one-month high after reporting third-quarter earnings and revenue ahead of estimates.

     Toronto-Dominion Bank and Royal Bank of Canada slipped more than 1.3 percent to weigh on financial companies in the S&P/TSX. The group posted its steepest weekly decline in almost three months.

     Of the more than 200 companies in the S&P/TSX to report in the current period, about 60 percent missed revenue estimates, according to data compiled by Bloomberg.

     Valeant Pharmaceuticals International Inc. added 2.5 percent, rebounding from a two-year low. Valeant, briefly the largest stock in Canada by market capitalization this year, has lost 71 percent from an Aug. 5 high amid pressure over how it prices its drugs. 

US

By Dani Burger

     (Bloomberg) — U.S. stocks declined, capping their first weekly drop since September, after weaker-than-expected retail sales data added to concern that growth remains uneven as policy makers consider raising interest rates as soon as next month.

     Retailers and apparel companies led the drop after Nordstrom Inc.’s results missed analysts’ estimates, sending its shares down 15 percent. Cisco Systems Inc. slumped 5.8 percent, dragging technology companies lower after its outlook disappointed. Energy shares sank as oil fell to its lowest in more than two months.

     The Standard & Poor’s 500 Index retreated 1.1 percent to 2,023.04, with the gauge posting its worst week since August as it closed at a three-week low. The Dow Jones Industrial Average declined 202.83 points, or 1.2 percent, to 17,245.24. The Dow had its biggest back-to-back drop in more than two months. The Nasdaq Composite Index lost 1.5 percent. About 7.7 billion shares traded hands on U.S. exchanges, 4 percent above the three-month average.

     “The takeaway from today’s retail data is more concern about the pace and magnitude of any Fed rate hike cycle on a still uneven growth experience in the economy,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve of US Bank in New York. “There was continued strength in the labor market, which is giving the Fed confidence to raise. But there’s softness with data beyond that and without oil moving meaningfully higher suggests we won’t see commodity price pressures.”

     As investors evaluate the strength of the world’s largest economy, data today showed sales at retailers rose less than forecast last month as consumers pocketed the money saved after fueling up their cars. A separate report showed wholesale prices unexpectedly declined in October for a second month. Meanwhile, consumer sentiment climbed to a four-month high in a preliminary November reading as Americans took heart in lower interest rates and store discounts.

     The S&P 500 has advanced just once in the eight sessions since Federal Reserve Chair Janet Yellen reminded investors that December’s policy meeting could bring the first rate increase since 2006. The U.S. equity benchmark has declined 4.1 percent since rallying to within 1 percent of a record on Nov. 3. Energy, technology and consumer discretionary shares have each dropped at least 4.5 percent this week, the most since August.

     Federal Reserve Bank of Cleveland President Loretta Mester said today a strengthening U.S. economy is ready for higher interest rates as she predicted growth of 2.5 percent to 2.75 percent through the rest of this year and next year. Fed officials yesterday stressed that monetary policy should be tightened only gradually after rates are increased.

     Traders are currently pricing in a 64 percent chance of a Fed rate increase in December, up from as low as 27 percent last month. Odds increased sharply after last Friday’s stronger-than- expected October jobs report.

     Economic data will have center stage as the majority of companies in the S&P 500 have now reported earnings results. About 73 percent beat profit estimates while just 44 percent surpassed sales expectations. Analysts are now predicting a 3.7 percent fall in earnings in the third quarter, an improvement on estimates for a 7.2 percent drop at the start of the season.

     The Chicago Board Options Exchange Volatility Index rose 9.3 percent Friday to 20.08. The measure of market turbulence known as the VIX was up 40 percent this week, the most since August.

     Consumer discretionary companies fell 2.7 percent on the softer-than-expected retail data and earnings results, the worst performer among the S&P 500’s 10 major groups. Discretionary companies saw their biggest weekly drop in almost three months.

     Nordstrom joined Macy’s Inc. in posting weak quarterly results, hinting at a dwindling appetite among consumers for department stores. Macy’s sank 4.2 percent, while Ross Stores Inc. and Kohl’s Corp. fell at least 6.4 percent. Fossil Group Inc. plunged 37 percent to a five-year low after its sales missed analysts’ estimates, fueling concern that the watch industry is mired in a slump and losing ground to wearable technology.

     Nordstrom’s results renewed a retreat among apparel companies that sell their clothes in large department stores. Michael Kors Holdings Ltd. and PVH Corp. declined more than 4.7 percent following a brief reprieve yesterday after Kohl’s earnings topped estimates. Under Armour Inc. and Nike Inc. slumped at least 3.2 percent with the group marking its worst week in more than four years.

     GameStop Corp. tumbled 17 percent, the most in more than a year. Pacific Crest Securities LLC downgraded the shares to the equivalent of hold from buy, citing struggling physical software sales as digital downloads of games affects growth. Among other retailers, Best Buy Co. slumped 5.7 percent to a more than two- month low.

     Cisco Systems posted its steepest decline in two years after saying weaker global economic growth and the strength of the U.S. dollar are hurting international sales of its equipment. F5 Networks Inc. and Juniper Networks Inc. lost more than 3.1 percent, while Oracle Corp. sank 3.4 percent. Also weighing on the tech group, Facebook Inc. declined 3.8 percent and Apple Inc. decreased 2.9 percent, taking its slide this week to 7.2 percent, the most since August.

     Energy companies in the benchmark slid for the seventh time in eight days, retreating 0.6 percent after an earlier drop of 1.6 percent. Oil saw a second weekly decline, falling to its lowest level in more than two months as U.S. crude stockpiles rose three times more than forecast. Chesapeake Energy Inc. fell 3.5 percent and Exxon Mobil Corp. slid 1.7 percent.

     Perrigo Co. slid 6.2 percent, the most in 18 months, after Mylan NV failed to attract a majority of Perrigo shareholders to its $26 billion takeover offer. Generic drugmaker Mylan said about 40 percent of Perrigo holders tendered their shares by the Friday deadline, short of the 50 percent required to move ahead. Mylan rallied 13 percent, the most since April.

     Yum! Brands Inc. also moved on company news, climbing 3.5 percent after the fast-food chain owner reported same-store sales at its restaurants in China grew an estimated 5 percent last month. Yum recently bowed to activist pressure, agreeing to spin off its China business from its U.S. operations.

     Raw-materials companies in the benchmark rose 1.2 percent, trimming their worst weekly decline since September. Alcoa Inc. and fertilizer maker Mosaic Co. gained more than 1.7 percent.

Have a wonderful weekend everyone.

Be magnificent!

 “Nothing will work unless you do.” Maya Angelou

As ever,

Karen

 

 “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible.” Francis of Assisi

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7