October 14, 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

Visitors view the autumn foliage of acer trees in the Old Arboretum at Westonbirt in south west England. The Japanese maples are some of the first species to turn red and orange at this famous tree collection, originally planted in the nineteenth century. Toby Melville/Reuters

Two crowned cranes stand face to face in their compound at the zoo in Berlin. These cranes are native to the Sahel and West Africa. Stephanie Pilick/dpa/AP

Market Closes for October 14^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Oct. 14 (Bloomberg) — Canadian stocks fell, sending the Standard & Poor’s/TSX Composite Index to an eight-month low, as concern about energy demand pushed oil producers lower for the 10th straight day, the longest streak since 1997.

     Energy stocks in the index lost 2 percent as a group, the biggest loss among 10 industries. Precision Drilling Corp. and Canadian Natural Resources Ltd. slid at least 3.1 percent. Air Canada lost 4.3 percent, following a broad selloff in airlines on concern over the spread of Ebola.

     The S&P/TSX sank 0.8 percent to 14,113.55 at 12:32 p.m. in Toronto, the ninth decline in 11 days. Earlier, the index fell 1.8 percent, briefly reaching a 10 percent drop from its record on Sept. 3. The S&P/TSX is still up 4 percent for 2014.

     “Part of the selloff is energy related, but then you have the other challenge that the areas of the TSX not related to commodities were perhaps overvalued,” said Philip Petursson, director of institutional equities at Manulife Asset Management Ltd. in Toronto. His firm manages about $281 billion. “You’ve got a valuation adjustment going on at the same time as energy prices are dropping substantially.”

     Six of 10 industries in Canada’s benchmark index declined today. Trading volume was 64 percent higher than the 30-day average at this time of day, according to data compiled by Bloomberg.

     Producers of commodities from oil to copper and gold have slumped after leading gains in the benchmark equity gauge in the first half of the year amid concern economic growth is slowing in Europe and China. The S&P/TSX Energy Index, which accounts for about a quarter of the broader gauge, has plunged 18 percent from a June peak to erase its advance for the year.

     Canadian Natural Resources sank 3.1 percent to C$37.27. The oil and gas producer has fallen for 11 days, the longest streak since June 1988.

     Brent crude fell to the lowest level in almost four years after the International Energy Agency said oil demand will expand this year at the slowest pace since 2009. West Texas Intermediate slipped for the fifth time in six days.

     Oil futures have collapsed into bear markets as shale supplies boost U.S. output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than trim output.

     The S&P/TSX trades at 18 times reported earnings, down from a peak of 21 in late July, according to data compiled by Bloomberg.

     Canadian Pacific Railway Ltd. rose 0.6 percent. The company made a merger proposal last week to CSX Corp. that was rebuffed, according to people familiar with the matter. CSX is the largest U.S. eastern railroad. Canadian National Railway Co. slid 0.7 percent to C$71.75.

     Pretium Resources Inc. jumped 18 percent to C$6.55 and AuRico Gold Inc. climbed 10 percent to C$4.16 to pace gains among raw-materials producers. Gold for December delivery added 0.2 percent to $1,232.70 an ounce in New York, the highest in almost four weeks, as concern that economic growth is slowing spurred demand for a haven asset.

US

By Joseph Ciolli and Callie Bost

     Oct. 14 (Bloomberg) — A rebound in U.S. stocks faded late in the session as energy shares slid with the price of oil, snuffing out most of an earlier rally in benchmark indexes led by industrial companies, airlines and banks.

     The Standard & Poor’s 500 Index ended the session up less than 0.2 percent at 1,877.70 at 4 p.m. in New York after earlier climbing as much as 1.3 percent. The measure is down 6.6 percent from its record on Sept. 18 and yesterday capped its worst three-day retreat since 2011. The Dow Jones Industrial Average lost 5.88 points, or less than 0.1 percent, to 16,315.19 today, wiping out a 143 point earlier gain.

     “The last hour has come down to ‘do you want to hold stocks overnight or not?’” Ryan Detrick, a Cincinnati-based strategist at investment research firm See It Market, said by phone. “There’s a lot of skittishness and concerns out there with headlines on a global slowdown, a recession in Europe, a slowdown in Asia and Ebola.”

     Energy shares in the S&P 500 lost 1.2 percent as a group and extended their retreat from a June record to 20 percent. West Texas Intermediate crude oil slid 4.6 percent to $81.84 a barrel, the lowest settlement price in more than two years, after the International Energy Agency said demand will expand this year at the slowest pace since 2009. Brent crude sank to the lowest since 2010.

     Small-cap stocks pared gains, leaving the Russell 2000 Index up 1.2 percent after a midday gain of as much as 2.5 percent. About 9.2 billion listed shares changed hands in the U.S., 51 percent higher than the three-month daily average.

     Some 53 S&P 500 companies are scheduled to release earnings this week, according to data compiled by Bloomberg. Profit for members of the index probably rose 4.8 percent in the third quarter and sales gained 4.2 percent, analysts projected.

     Data from Europe today showed consumer prices in Sweden and Spain fell, U.K. inflation slowed to a five-year low, and a measure of German investor confidence decreased for a 10th month. The German government cut its economic forecast for this year and for 2015.

     U.S. equities lost about $744 billion in value from Oct. 8 through yesterday amid concern that slower global growth could hurt America’s economic recovery just as the Federal Reserve gauges when to raise interest rates. Yesterday’s selloff accelerated as airlines sank on Ebola concerns and energy shares plunged.

     The S&P 500 closed below its 200-day average for the first time in two years yesterday and slid to the lowest level since May.

     The Chicago Board Options Exchange Volatility Index decreased 7.51 percent to 22.79 today. The gauge known as the VIX rose 16 percent yesterday to its highest level since June 2012, bringing the index’s three-day move to 63 percent.

     “It has been a pretty fierce sell-off and investors reached an extreme risk aversion,” said Thomas Thygesen, head of cross-asset strategy at Skandinaviska Enskilda Banken AB in Copenhagen. “You can’t keep that selling momentum forever. Concerns that slower global growth would affect the U.S. have been overdone. We know the Fed will only adjust interest rates once the time is right, and they have reassured markets.”

     Chevron Corp., Schlumberger Ltd. and ConocoPhillips lost more than 2 percent to lead declines in 32 of 43 energy companies in the S&P 500 as the group erased a morning gain of as much as 1.5 percent.

     The Bloomberg U.S. Airlines Index increased 6.3 percent after plummeting 16 percent over the prior six trading sessions. United Continental Holdings Inc. increased 6.5 percent to $43.17, while American Airlines Group Inc. jumped 10 percent and Delta Air Lines Inc. climbed 6.1 percent.

     The Centers for Disease Control and Prevention is establishing an “Ebola response team” that can be on site in hours at any hospital if a case of the virus is reported, CDC Director Tom Frieden told reporters today. Experts at a Dallas hospital are making “immediate enhancements” to practices, including a site manager who will make sure protective gear is used correctly and limiting number of staff who will give care, he said.

     Financial stocks in the S&P 500 gained 0.5 percent as a group, paring an earlier 1.2 percent rally. Crown Castle International Corp. rose 3 percent to $80.80 after activist investor Corvex Management LP said the company should either increase its dividend payout ratio or boost its leverage ratio and buy back more stock. After recent meetings with company management, Corves said Crown Castle’s stock could top $100 by following its suggestions.

     Citigroup Inc. climbed 3.2 percent to $51.47. The third- biggest U.S. bank said profit rose 6.6 percent, topping estimates as bond-trading revenue climbed and lending improved. The firm also announced plans to exit consumer banking in 11 markets.

     JPMorgan Chase & Co. slipped 0.3 percent to $57.99, paring an earlier 3.6 percent tumble. The biggest U.S. bank swung to a third-quarter profit from a year earlier as a surprise gain in fixed-income trading helped boost revenue and legal costs narrowed. Net income was $1.36 a share, compared with a loss of $380 million, or 17 cents, a year earlier on legal and regulatory costs, according to a statement. Analysts on average had forecast EPS of $1.39.

     Wells Fargo & Co. slipped 2.7 percent to $48.83. The world’s most valuable bank posted a third-quarter profit that matched analysts’ estimates as mortgage banking revenue fell from the previous three-month period.
 

Have a wonderful evening everyone.

Be magnificent!

“Life is a song – sing it. Life is a game – play it. Life is a challenge – meet it. Life is a dream – realize it. Life is a sacrifice – offer it. Life is love – enjoy it.” Sai Baba 

As ever,

Karen

“The most important thing is to enjoy your life – to be happy – it’s all that matters.” Audrey Hepburn

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