November 7th, 2011 Newsletter
Dear Friends,
Tangents:
Birthday: Joni Mitchell, b. November 7th, 1943
…Don’t it always seem to go
That you don’t know what you’ve got
‘Til it’s gone
They paved paradise
To put up a parking lot…
~Joni Mitchell, Big Yellow Taxi
Photo of the day
November 7, 2011
A Kenyan man smiles as he holds a yellow balloon handed out as part of an art project by American artist Yazmany Arboleda in Nairobi, Kenya. Thousands of yellow balloons are floating above commuters in downtown Nairobi, in the third in a series of seven art projects around the world known as ‘Monday Morning.’ Khalil Senosi/AP.
Market Commentary:
Canada
By Matt Walcoff
Nov. 7 (Bloomberg) — Canadian stocks rose after a decline last week as gold producers gained amid political turmoil in Greece and Italy.
Goldcorp Inc., the world’s second-biggest gold producer by market value, increased 3.6 percent as the metal advanced to a six-week high. Cameco Corp., the world’s largest uranium producer, fell 6.5 percent after its third-quarter profit missed the average analyst estimate in a Bloomberg survey.
The Standard & Poor’s/TSX Composite Index climbed 53.73 points, or 0.4 percent, to 12,461.98.
“The political environment is driving the stock market,” Jennifer Radman, a money manager at Caldwell Investment Management Ltd. in Toronto, said in a telephone interview. The firm oversees about C$1 billion ($984 million). “Gold has been around for thousands of years. When we have political instability, it’s been the safe haven.”
The index decreased 0.9 percent last week as financial stocks retreated while European officials debated the bailout of Greece and companies including Manulife Financial Corp. and Sun Life Financial Inc. reported earnings that trailed analysts’ average estimates. The S&P/TSX has slipped 7.3 percent this year through Nov. 4 after surging 50 percent the previous two years.
The yield on Italian 10-year government bonds rose to a euro-era record today on concern Prime Minister Silvio Berlusconi’s government is collapsing.
Three members of Berlusconi’s party have defected to the opposition in the past week, and six others called for the prime minister to resign in a letter to newspaper Corriere della Sera. As many as 20 are ready to leave the coalition, Repubblica daily reported yesterday, without citing anyone.
Italian Interior Minister Roberto Maroni told a talk show yesterday he fears the coalition no longer commands a majority in parliament.
The S&P/TSX Gold Index advanced to the highest close since Sept. 21. Barrick Gold Corp., the world’s largest gold producer, gained 2.5 percent to C$53.54. Goldcorp climbed for a fifth day, increasing 3.6 percent to C$54.30. Silver Standard Resources Inc., which mines in Latin America, jumped 7.5 percent to C$21.03 as silver rose.
Cameco slumped 6.5 percent, the most since March 16, to C$20.35 after reporting third-quarter earnings that missed the average analyst estimate by 19 percent, excluding certain items. The company also cut its 2011 uranium-production forecast.
Valeant Pharmaceuticals International Inc., Canada’s largest drugmaker, decreased 5 percent to C$42.76. The shares soared 16 percent in the previous two sessions after the company topped analysts’ earnings estimates. Investors may have underestimated the effect of “special accounting” for some royalties in the company’s statement, David Risinger, an analyst at Morgan Stanley, said in a note to clients today.
Petrominerales Ltd., an oil and gas producer with operations in Colombia, fell for a sixth day, dropping 4.6 percent to C$22.97. Nathan Piper, an analyst at Royal Bank of Canada, cut his 12-month share-price estimate to C$46 from C$48, after the company missed third-quarter earnings estimates on Nov. 3.
Oil and gas explorer America’s Petrogas Inc. soared 19 percent to C$2.35 after Guy Gordon, an analyst at Byron Capital Markets, began coverage of the company with a “speculative buy” rating.
Gasfrac Energy Services Inc., an oilfield-services company, surged 17 percent, the most since February 2009, to C$8.22. The company’s third-quarter earnings doubled the average estimate among analysts in a Bloomberg survey, excluding certain items.
Canadian National Railway Co., the country’s largest railroad, rose 1.1 percent to C$80.61 after saying it will buy back as many as 5.65 million shares from a third-party seller by March 31.
The S&P/TSX Telecommunication Services Index advanced to the highest since May 2008 after BCE Inc. and Telus Corp. reported third-quarter profit that surpassed analysts’ average estimates on Nov. 3 and Nov. 4, respectively.
Rogers Communications Inc., Canada’s largest wireless carrier, increased 0.9 percent to C$38.09. Regional carrier Bell Aliant Inc. climbed 0.7 percent to C$27.65.
US
By Rita Nazareth
Nov. 7 (Bloomberg) — U.S. stocks rose, following the first weekly retreat in the Standard & Poor’s 500 Index since September, as the European Central Bank’s Juergen Stark said the region’s debt crisis will be under control in two years.
Home Depot Inc. and Hewlett-Packard Co. gained at least 2.6 percent for the biggest advances in the Dow Jones Industrial Average. Amgen Inc., the largest biotechnology company, jumped 5.9 percent after saying it is planning to buy back as much as $5 billion in shares. First Solar Inc., the world’s largest maker of thin-film solar panels, dropped 3.7 percent as two Chinese solar companies cut forecasts for shipments.
The S&P 500 advanced 0.6 percent to 1,261.12 at 4 p.m. New York time, recovering from an earlier decline of as much as 1 percent. The benchmark gauge slumped 2.5 percent last week. The Dow increased 85.15 points, or 0.7 percent, to 12,068.39 today.
“The Europeans are doing some heavy lifting,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $44 billion, said in a telephone interview. “The leadership has a good understanding of what needs to be done and they’ve set a goal for themselves. They are now going through the sausage-making process of crafting a solution.”
Italian 10-year borrowing costs surged to a euro-era record amid concern the region’s third-largest economy is struggling to manage its debt loads, while growth in Europe is faltering.
Investors are betting Prime Minister Silvio Berlusconi may be forced to resign if he fails to win majority support in tomorrow’s vote on the 2010 budget report.
Stark, a member of the ECB’s executive board, speaking at an event in Lucerne, Switzerland, said the debt crisis may be under control within two years to the point there will be “no need for further political actions.”
“There’s maybe a sense that enough has been done in Europe,” James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $333 billion, said in a telephone interview. “It’s certainly not the cure, but it may calm down the market.”
Greek Prime Minister George Papandreou agreed yesterday to step down, paving the way for the creation of a new government to get international aid and avert a default. European finance chiefs met in Brussels today to work on a plan to raise the region’s bailout fund.
Stocks slumped on Oct. 31 and Nov. 1 as Papandreou announced his desire to hold a vote on a European Union bailout.
After rallying two straight days, the S&P 500 dropped on Nov. 4 as the Group of 20 nations failed to agree on increasing the International Monetary Fund’s resources to fight the crisis.
Some of the biggest companies rose today. Home Depot increased 2.6 percent to $37.34. Hewlett-Packard gained 3.4 percent to $27.88.
Amgen rallied 5.9 percent to $58.43. The stock repurchase plan, amounting to about 10 percent of the company, is part of a current $10 billion buyback program, Amgen said in a regulatory filing today. The drugmaker will raise debt to help fund it. The offer starts tomorrow at a range of $54 to $60 a share, and Amgen will have about $2 billion of net debt afterwards, said Mark Schoenebaum, an analyst with ISI Group.
Dish Network Corp., the second-largest U.S. satellite-TV provider, gained 5 percent to $24.66, after awarding a special dividend that allayed investors’ concerns the company will invest billions in a wireless network.
Jefferies Group Inc. added 1.4 percent to $12.24. The New York-based firm cut gross holdings in sovereign securities of Portugal, Italy, Ireland, Greece and Spain by almost 50 percent since last week’s close of trading, to show how easily it can reduce funds at risk. Jefferies slumped 18 percent last week as Egan-Jones Ratings Co. downgraded the firm’s debt, citing large “sovereign obligations” relative to equity.
Financial shares tumbled the most in the S&P 500 last week, losing 5.4 percent, on concern about potential losses from Europe and as MF Global Holdings Ltd. filed for bankruptcy protection after making bets on European sovereign debt. CME Group Inc. is reducing the initial margin required to back futures trades to ease the bulk transfer of accounts held by MF Global customers.
“The decision to roll back margin requirements is a positive,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said in an e-mail.
“Otherwise there would have been a tremendous amount of margin calls, which could have caused a good amount of selling in other markets to pay for the margin calls.”
First Solar declined 3.7 percent to $47.74. Yingli Green Energy Holding Co. and Renesola Ltd. cut forecasts for shipments and wrote down inventory, the latest in a series of industry warnings. Solar companies around the world are cutting profit forecasts as plunging prices spurred on by a surge in Chinese manufacturing capacity crimps margins.
S&P 500 companies are poised to report the biggest annual sales increase on record even as analysts reduce their estimate for growth in 2012. Revenue in the benchmark gauge of American common equity will rise 11 percent to $1,052.42 a share in 2011, according to more than 10,000 forecasts compiled by Bloomberg.
Projections for next year have been cut 1 percent in the past month after 43 percent of S&P 500 companies from 3M Co. to Amazon.com Inc. missed third-quarter forecasts, the most since 2009, data show.
Bulls say record gains in sales mean the economy is doing well enough for equities to rally after price-earnings ratios fell 20 percent below the six-decade average. To bears, the deceleration in growth shows the European debt crisis is curbing the economy and that stocks will resume declines after the S&P 500 posted its biggest monthly rally since 1991.
“Everybody thinks the world’s coming to an end, but corporate America is doing great and it’s a function of good sales,” Eric Green, a Philadelphia-based fund manager at Penn Capital Management, which oversees about $6 billion, said in a telephone interview on Nov. 3. “It’s not unusual that you get these short-term slowdowns during panicky markets. The sales estimates coming down is a good thing because it allows to companies to meet or beat more easily.”
Have a wonderful evening everyone.
Be magnificent!
To slight a single human being is to slight those divine powers
and thus harm not only that being but with him the whole world.
-Mahatma Gandhi, 1869-1948
As ever,
Carolann
Keep calm and carry on.
-King George VI, 1895-1952
advice to his countrymen during World War II