October 10, 2014 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

Malala Yousafzai poses with a bouquet after speaking during a media conference at the Library of Birmingham, in Birmingham, England, after she was named as winner of The Nobel Peace Prize. Rui Vieira/AP

An elephant of the Swiss national circus ‘Knie’ takes a bath in the Lake Geneva, at the Bellerive beach near Lausanne, Switzerland.Valentin Flauraud/AP

Market Closes for October 10^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Oct. 10 (Bloomberg) — Canadian stocks fell a second day amid a global market selloff, tumbling the most in more than a year, as declining oil and metal producers outweighed better- than-expected jobs data.

     Calfrac Well Services Ltd. slumped 8.4 percent and Trican Well Service Ltd. declined 6 percent, as a gauge of energy stocks tumbled a ninth day for its worst losing streak in three years. Air Canada fell 5 percent for a fourth day of declines.

     The Standard & Poor’s/TSX Composite Index fell 233.24 points, or 1.6 percent, to 14,227.36 at 4 p.m. in Toronto, the biggest decline since June 2013 and a six-month low. The equity gauge fell this week for the sixth straight time, the longest stretch since April 2012. The S&P/TSX has tumbled 9.1 percent from its Sept. 3 record.

     “A lot of financial players in oil are exiting the market,” said Monika Skiba, a senior managing director and fund manager at Manulife Asset Management Ltd. in Toronto. Her firm manages about $281 billion. “The reason they’re doing it is the expectations of global growth going weaker. Energy is still weak, gold stocks are continuing to be weak, and industrials.”

     The MSCI All-Country World Index, which tracks both developed and developing markets, fell 1.6 percent to the lowest since February as the Dow Jones Industrial Average erased its gains for the year. The Bloomberg Commodity Index dropped 0.5 percent.

     “A large part of the rise in commodities and energy prices in 2014 was unwarranted,” said Kash Pashootan, portfolio manager at First Avenue Advisory of Raymond James Ltd. in Ottawa. His firm manages C$220 million. “It’s been purely driven by geopolitical concerns and uncertainty with supply disruptions. The TSX will trade in the short and medium term based on how elevated those risks are.”

     The unemployment rate in Canada unexpectedly dropped to 6.8 percent last month, the lowest since December 2008, as the economy added 74,100 new jobs, including 69,300 full-time positions. Economists had forecast an increase of 20,000, and an unchanged employment rate.

     All 10 industries in Canada’s benchmark gauge declined, on trading volume 32 percent higher than the 30-day average.

     Calfrac Well Services plunged 8.4 percent to C$13.90, the most since 2011. Trican lost 6 percent to C$10.98, close to a two-year low. Energy stocks retreated 1.5 percent as a group to an eight-month low.

     The S&P/TSX Energy Index has fallen for nine days, the longest stretch since August 2011, and is down 17 percent from its June peak this year.

     Crude in New York posted the biggest weekly drop since January after falling into a bear market yesterday as it slid 20 percent from its June high. Brent crude traded near a four-year low.

     Canadian Pacific Railway Ltd. dropped 4.7 percent to C$212.20 and Canadian National Railway Co. retreated 3 percent to C$72.25 as industrial stocks slumped 2.8 percent, the most in three years.

     Novagold Resources Inc. slumped 11 percent to C$3.11 as gold futures fell from a two-week high. Raw-materials stocks sank 1.8 percent as a group to a December low.

US

By Callie Bost

     Oct. 10 (Bloomberg) — The Standard & Poor’s 500 Index posted the biggest weekly drop in two years as concern about chipmaker earnings fueled a rout across the technology industry.

     The Dow Jones Industrial Average erased gains for the year as Intel Corp., Microsoft Corp. and Cisco Systems Inc. fell more than 3.5 percent. Microchip Technology Inc. tumbled 12 percent said quarterly revenue was crimped by a decline in China sales and warned of an industry correction. Juniper Networks Inc. sank 9.1 percent after reporting preliminary results that missed its own forecast.

     The S&P 500 lost 1.1 percent to 1,906.13 as of 4 p.m. in New York. The index fell 3.1 percent for the week, the biggest drop since May 2012. The Nasdaq Composite Index sank 2.3 percent. The Dow average lost 115.15 points, or 0.7 percent, to 16,544.10.

     “It’s been an emotional roller coaster,” Mark Freeman, who oversees $20.1 billion as chief investment officer at Westwood Holdings Group Inc., said by phone. “It’s really about investors’ degree of confidence on growth outside of the U.S. and that’s what has been called into question.”

     The Chicago Board Options Exchange Volatility Index jumped above 20 for the first time since February, surging 46 percent for the week. The S&P 500 has moved more than 1 percent for the past four days.

     About 9.2 billion shares changed hands on U.S. exchanges, the most in three weeks, according to data compiled by Bloomberg. For the week, the average was 7.9 billion, the most since 2011.

     Global equities have lost $3.5 trillion in value since reaching a record last month. European Central Bank President Mario Draghi clashed with Germany’s finance minister yesterday over the steps needed to revive growth in the euro area, while Federal Reserve officials have said the U.S. economy may be at risk from a global slowdown.

     Stocks continued to slip after 4 p.m. after the close of equity exchanges, with S&P 500 December futures falling as low as 1,895. The contract closed at 1,897.4 on Aug. 7 and reached an intraday level of 1,892.9 that day, a key level for technical analysts.

     The S&P 500 has fallen for the past three weeks, the longest run since January. It’s down 5.2 percent from a record on Sept. 18, trimming its gain for the year to about 3 percent.

     Chipmakers had the worst losses today, with the Philadelphia Semiconductor Index falling almost 7 percent. Microchip Technology sank 12 percent to $39.96 after reporting preliminary quarterly sales that trailed forecasts. The company makes semiconductors used in products ranging from home appliances to computer network hardware to cars, making its earnings a broad indicator of demand across the industry.

     “We believe that another industry correction has begun, and that this correction will be seen more broadly across the industry in the near future,” Steve Sanghi, Microchip’s chief executive officer, said in a statement.

     Juniper Networks dropped 9.1 percent to $19.04. Revenue is projected to be $1.11 billion to $1.12 billion, less than Juniper’s own estimate of $1.15 billion to $1.2 billion, the company said.

     The International Monetary Fund cut its forecast for global growth this week and said the euro area faces the risk of a recession. European Central Bank President Mario Draghi pledged at the IMF’s annual meeting to loosen monetary policy more if needed. That contrasted with German Finance Minister Wolfgang Schaeuble, who warned against U.S.-style quantitative easing and urged continued budgetary discipline.

     Federal Reserve policy makers said in minutes of their last meeting that slowing global growth and the stronger greenback posed potential risks to the U.S. outlook.

     Investors are also watching earnings reports after Alcoa Inc. unofficially kicked off the results season this week. JPMorgan Chase & Co., Citigroup Inc., BlackRock Inc. and Google Inc. are among S&P 500 members posting results next week. Profit for companies in the index probably rose 4.8 percent and sales gained 4.2 percent in the third quarter, analysts projected.

     “It’s healthy to have corrections along the way because it does reduce valuations, it does shake out people that don’t have fundamental convictions,” Jim McDonald, chief investment strategist at Chicago-based Northern Trust Corp., said by phone. His firm manages about $924 billion. “A long overdue correction can help the bull market have a longer duration.”

Have a wonderful Thanksgiving Everyone!!

Be magnificent!

“Cultivate the habit of being grateful for every good thing that comes to you, and to give thanks continuously. And because all things have contributed to your advancement, you should include all things in your gratitude.” ― Ralph Waldo Emerson

As ever,

Karen

“The roots of all goodness lie in the soil of appreciation for goodness.” – Dalai Lama 

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