November 2nd, 2011 Newsletter
Dear Friends,
Tangents:
DAY OF THE DEAD (Dia de los Muertos), November 2nd:
The spirit lives on….love never dies.
Photo of the day
November 2, 2011
A woman with a ‘Calavera’, or skull, painted on her face takes part in a Day of the Dead celebration in Mexico City. Each year, Mexicans observe the holiday by gathering together to remember deceased relatives and friends. Jorge Silva/Reuters.
Market Commentary:
Canada
By Matt Walcoff
Nov. 2 (Bloomberg) — Canadian stocks rose for the first time in three days as energy and financial shares gained after European leaders moved to prevent their debt-crisis strategy from unraveling.
Suncor Energy Inc. increased 1.6 percent as crude oil climbed for the first time in four days after Greek Prime Minister George Papandreou was summoned to a Group of 20 meeting to hear there is no alternative to budget cuts. Bank of Nova Scotia, the country’s third-largest lender by assets, advanced 1.6 percent. Barrick Gold Corp., the world’s largest producer of the metal, gained 1.8 percent as the U.S. Dollar Index declined from a three-week high.
The Standard & Poor’s/TSX Composite Index rose 84.48 points, or 0.7 percent, to 12,199.58 at 2:15 p.m. Toronto time.
The index fell 3.2 percent over the past two days as Papandreou said he will subject his country’s bailout plan to a referendum.
“The shock and awe from the Greek decision to do a referendum had its moment in the sun, and now the market has digested that and is looking beyond it,” Gerry Brockelsby, a money manager at Marquest Asset Management Inc. in Toronto, said in a telephone interview. The firm oversees about C$250 million ($246 million). “We’re in the final throes here of a resolution.”
The S&P/TSX dropped 15 percent from April 5 to yesterday as base metals and financial shares declined in part on concern Europe’s debt crisis will weaken the global economy. Energy, raw-materials and financial companies make up 76 percent of Canadian stocks by market value, according to Bloomberg data.
Parandreou, whose country is not a G-20 member, will attend the group’s meeting that begins in Cannes, France, tomorrow.
Among the other leaders in attendance will be French President Nicolas Sarkozy, who said yesterday the bailout strategy crafted last week is the “only way to resolve Greek debt problems.”
Canada’s benchmark stock gauge gained as much as 1.7 percent today before the U.S. Federal Open Market Committee released a policy statement that didn’t include a new round of asset purchases.
The S&P/TSX Energy Index rebounded from the lowest close since Oct. 20. Suncor climbed 1.6 percent to C$31.42. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, rose 1.9 percent to C$34.64.
Western Canadian oil and gas producer Trilogy Energy Corp. surged 5.6 percent to C$34.63 after at least five analysts raised their share-price estimates.
Bank of Montreal’s Gordon Tait, who increased his estimate to C$36 from C$30, cited “continued positive results” from the company’s operations in the Kaybob area of Alberta and the “increasing potential” of its Duvernay shale-gas development.
Enerflex Ltd., which provides products and services to the energy industry, jumped 6.4 percent to C$10.67 after saying it won a contract worth about $228 million for a gas-processing plant in Oman.
Gold stocks in the S&P/TSX advanced to the highest intraday since Sept. 23. Barrick increased 1.8 percent to C$51.21.
Goldcorp Inc., the world’s second-biggest company in the industry by market value, climbed 1.9 percent to C$50.90.
NovaGold Resources Inc., which is developing gold and base- metals properties in Alaska and British Columbia, gained 1.6 percent to C$9.55.
Wesdome Gold Mines Ltd., which operates in Ontario, tumbled 19 percent, the most intraday since 2008, to C$2.10 after saying third-quarter production and sales trailed its forecasts.
The S&P/TSX Diversified Metals & Mining Index rose. Teck Resources Ltd., Canada’s largest base-metals and coal producer, increased 1.8 percent to C$38.65. First Quantum Minerals Ltd., the country’s second-largest publicly traded copper producer, advanced 4.4 percent to C$20.73. Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, rallied 3.1 percent to C$21.04.
Potash Corp. of Saskatchewan Inc. rebounded 1.6 percent to C$47.31 after sinking 7.7 percent in the previous three days.
Potash prices will rise next year due to low inventories and historically high corn futures, P.J. Juvekar, an analyst at Citigroup Inc., wrote in a note to clients.
Financial companies in the S&P/TSX climbed for the first time in four days. Scotiabank advanced 1.6 percent to C$51.97.
Toronto-Dominion Bank, the country’s second-largest lender by assets, rose 0.7 percent to C$73.33. Brookfield Asset Management Inc., Canada’s biggest real-estate company, gained 2.3 percent to C$29.06.
Industrial Alliance Insurance and Financial Services Inc. sank 6.6 percent to C$29.39 after reporting third-quarter earnings that trailed the average analyst estimate in a Bloomberg survey by 31 percent, excluding certain items. The shares earlier plunged as much as 8.4 percent, the most intraday since December 2009.
US
By Rita Nazareth
Nov. 2 (Bloomberg) — U.S. stocks advanced, rebounding from a two-day drop in the Standard & Poor’s 500 Index, as the Federal Reserve said economic growth strengthened and it is prepared to take action if needed to safeguard the recovery.
Gauges of commodity and financial shares had the biggest gains in the S&P 500 among 10 industries, rising at least 2.2 percent. Bank of America Corp., Chevron Corp. and Alcoa Inc. rallied more than 2.4 percent. MasterCard Inc. jumped 7 percent as profit beat analysts’ estimates. MF Global Holdings Ltd. tumbled 79 percent in its first day of over-the-counter trading after the futures brokerage filed for bankruptcy, prompting the New York Stock Exchange to delist the shares. The S&P 500 increased 1.6 percent to 1,237.90 as of 4 p.m.
New York time. The benchmark gauge for American equities fell 5.2 percent over the previous two days. The Dow Jones Industrial Average added 178.08 points, or 1.5 percent, to 11,836.04 today.
“People are focused on two comments — the economy has firmed and the Fed stands ready to take action,” Mark Bronzo, who helps manage $24 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “In addition, the fact that they are not taking action now makes you more comfortable that the economy is doing OK.”
The Federal Open Market Committee said “economic growth strengthened somewhat in the third quarter,” while also saying “significant downside risks” remain to the outlook. Stocks extended gains as Fed Chairman Ben S. Bernanke said additional purchases of mortgage-backed securities are a “viable option” if the state of the economy warrants further easing.
Fed officials lowered their outlook for U.S. economic growth in 2012 and forecast that unemployment will average from 8.5 percent to 8.7 percent in the final three months of next year. Forecasts for 2012 growth in U.S. gross domestic product from the five Fed Board members and 12 reserve bank presidents centered around 2.5 percent to 2.9 percent, measured from the fourth quarter of this year to the fourth quarter of next year.
For this year, the central tendency forecast for U.S. growth was 1.6 percent to 1.7 percent.
“They are going with no rocking of the boat as long as the improvement continues,” Bruce McCain, who helps oversee about $20 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland, said in a telephone interview. “There’s a lot more concern at this point that the Fed would try too hard to juice up things and perhaps complicate an inflation picture that clearly is becoming better. The Fed wants to have as much powder dry as they can simply because if Europe blows up they want to have something in reserve.”
Benchmark gauges rebounded after the biggest two-day drop in almost a month on concern Europe’s crisis was worsening.
Greek Prime Minister George Papandreou triggered the latest upheaval in the two-year-long crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on the rescue pact.
Papandreou, his hold on power weakening, was summoned to Cannes, France, for emergency talks on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out in a six-day crisis-management marathon. German Chancellor Angela Merkel said today that policy makers “must bring calm to the euro.”
The Morgan Stanley Cyclical Index climbed 1.8 percent on expectations the economy will be able to avoid a recession. The Dow Jones Transportation Average gained 1.3 percent. The KBW Bank Index increased 3.3 percent. Bank of America added 5 percent to $6.72. Alcoa jumped 3.2 percent to $10.70. Chevron rose 2.4 percent to $104.54.
MasterCard gained 7 percent to $357.66. Chief Executive Officer Ajay Banga, 51, is pushing to wrest market share from larger rival Visa Inc. New U.S. regulations on transaction fees charged to merchants for debit-card purchases also give retailers more say on how those transactions are routed, which may erode Visa’s dominance.
Phone stocks gained after the U.S. House voted to bar new state and local taxes on wireless services. Sprint Nextel Corp. climbed 9.2 percent to $2.72. AT&T Inc. increased 1.3 percent to $29.08.
AOL Inc. rallied 13 percent to $15.02. The Internet company that’s struggling to halt a sales slide reported third-quarter earnings that exceeded analysts’ estimates by 65 percent.
MF Global, quoted under the symbol “MFGLQ,” tumbled 79 percent to 25 cents, in its first day of over-the-counter trading after the futures brokerage filed for bankruptcy, prompting the New York Stock Exchange to delist the shares.
The stock hasn’t changed hands during a regular trading session since Oct. 28. NYSE Euronext suspended the stock before the New York Stock Exchange opened on Oct. 31. MF Global filed the eighth-largest U.S. bankruptcy this week after failing to find a buyer over the weekend. The futures broker suffered a ratings downgrade and loss of customers after revealing it had investments related to $6.3 billion in European sovereign debt.
Whether the U.S. economy falls into a recession or expands more slowly matters little when it comes to stock-market strategy, according to Richard Bernstein, chief executive officer of Richard Bernstein Advisors LLC.
Playing defense has been more rewarding in the past six months than investing in shares of cyclical companies, which are more susceptible to changes in the pace of economic expansion.
Makers of food, beverages, tobacco and other consumer staples are in the defensive category, along with health-care, telephone and utility stocks.
“Investors seem to spend too much time trying to ascertain the probability of a recession occurring,” Bernstein wrote in a report two days ago. A slowdown is enough to justify defensive strategies, favoring shares of companies whose sales and earnings growth is relatively stable, the report said.
Have a wonderful evening everyone.
Be magnificent!
That economics is untrue which ignores or disregards moral values.
The extension of the law of nonviolence in the domain of economics means nothing less
than the introduction of moral values as a factor to be considered with regulating international commerce.
-Mahatma Gandhi, 1869-1948
As ever,
Carolann
Sorrow and silence are strong, and
patient endurance is godlike.
-Henry Wadsworth Longfellow, 1807-1882