October 16, 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

Brokers monitor stock prices from their booths during a trading session at the Karachi Stock Exchange in Pakistan.

Engineers make their way down the north leg of the Gateway Arch in St. Louis, Mo., as they attempt to get samples of staining on the aging monument. The National Park service is hoping to sample the stains and figure out what caused them so they can be removed.

Market Closes for October 16^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Oliver Renick and Eric Lam

     Oct. 16 (Bloomberg) — Canadian stocks rallied the most in a year, rebounding from a four-day selloff, as energy stocks surged on speculation recent losses were overdone. Parex Resources Inc. jumped 8.4 percent after TD Securities recommended buying the shares. Athabasca Oil Corp. and ARC Resources Ltd gained at least 6.7 percent as energy stocks surged the most in three years. Westport Innovations Inc. jumped 14 percent. The Standard & Poor’s/TSX Composite Index climbed 1.3 percent to 14,052.97 at 4 p.m. in Toronto, the biggest advance since July 2013.

     “People are seeing really deep value in the energy and mining sectors,” said Paul Reynolds, chief executive officer at Canaccord Genuity Group Inc., on the phone from New York. “We’re encouraging our clients to look at those names and accumulate positions.”

    The index has fallen 10 percent since Sept. 3, trimming its advance for the year to 3.2 percent and erasing about C$286.6 billion from stocks through yesterday. Trading volume today was 39 percent higher than the 30-day average, according to data compiled by Bloomberg.

    The S&P/TSX Energy Index climbed 3.2 percent, the biggest increase since November 2011, as the industry rebounded from an 11-day losing streak. The energy gauge had slumped 13 percent in the past 11 days, erasing gains for the year in the longest slump since 1997.

    West Texas Intermediate oil rebounded from an earlier loss after a government report showed U.S. crude inventories expanded last week, exacerbating a global glut. WTI for November delivery rose 92 cents to settle at $82.70 a barrel in New York after dropping below $80 for the first time since June 2012.

    “If you have cash to deploy, now’s the time to do it,” said Les Stelmach, a fund manager at Franklin Bissett Investment Management in Calgary. Parex Resources, an oil and gas exploration company, jumped 8.4 percent to C$11, the most since July. TD Securities analyst Jamie Somerville raised the stock to buy from hold.

    Athabasca Oil surged 10 percent to C$4.39, rebounding from an all-time low yesterday. ARC Resources increased 6.7 percent to C$28.04, the biggest advance in two years.

    The S&P/TSX trades at 18.1 times reported earnings, down from a peak of 21 set in June, according to data compiled by Bloomberg.

    Air Canada, the nation’s largest airline, soared 4.3 percent to C$7.05, snapping six days of losses, and WestJet Airlines Ltd. climbed 6.4 percent. A measure of U.S. airlines recently entered a bear market amid rising concern of the spread of Ebola.

US

By Joseph Ciolli

    Oct. 16 (Bloomberg) — U.S. stocks recovered from early losses as St. Louis Federal Reserve Bank President James Bullard said policy makers should consider delaying the end of bond purchases to halt the decline in inflation expectations.

    Chesapeake Energy Corp. surged the most in almost six years, leading a rally in energy producers, on plans to sell natural gas and oil shale fields for $5.4 billion. Netflix Inc. plunged 19 percent after saying a price increase had slowed subscriber growth, while EBay Inc. sank 4.7 percent after its sales forecast missed estimates.

    The Standard & Poor’s 500 Index ended the session up 0.27 point, or less than 0.1 percent, at 1,862.76 at 4 p.m. in New York after falling as much as 1.5 percent. The index is down 7.4 percent from its last record on Sept. 18. The Dow Jones Industrial Average slipped 24.5 points to 16,117.24 as Goldman Sachs Group Inc. led declines after reporting a drop in trading revenue. The Russell 2000 Index added 1.3 percent and extended a three-day advance to 3.5 percent, its biggest since June.

    “The Bullard comments were a short-term shot of adrenaline,” Chad Morganlander, a money manager at St. Louis- based Stifel Nicolaus & Co., which oversees about $160 billion, said in a telephone interview. “The overall markets are hooked on QE and liquidity being withdrawn.”

    The S&P 500 held near its lowest level since April and clung to a 0.8 percent gain for the year following a slump triggered by concern about slowing economic growth in Europe and China and the spread of Ebola. Benchmark indexes recovered today as Bullard said the Fed to rethink plans to end its quantitative easing program.

    “Inflation expectations are declining in the U.S.,” Bullard said. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.” Speaking in an interview today with Bloomberg News, Bullard said U.S. economic fundamentals remain strong and he blamed the market turmoil on downgrades in the outlook for Europe.

    Fed officials are scheduled to next gather on Oct. 28-29 and have said they expect to end asset purchases after that meeting. U.S. 10-year Treasury yields were up 1.4 basis points to 2.15 percent today after falling below 2 percent yesterday for the first time since June 2013. The Fed aims for 2 percent inflation, as measured by the personal consumption expenditures price index, which was 1.5 percent in August and hasn’t exceeded 2 percent since March 2012. Expectations of future inflation, which are important because they can affect spending by businesses and households, have dipped in recent months alongside a decline in oil prices.

    A Bloomberg measure of market forecasts for average inflation over the next five years was 1.48 percent, compared with 2.1 percent in June.

    UnitedHealth Group Inc., Nike Inc. and Chevron Corp. rose more than 1.6 percent for the best gains in the Dow, while Goldman Sachs’s drop shaved 30 points off the index. Energy, industrial and commodity stocks led gains among five of the 10 main industries in the S&P 500. Energy producers have led the S&P 500’s slump since Sept. 18, losing 12 percent as a group.

    Chesapeake Energy Corp. surged 17 percent to $20.79, the most since December 2008. The company plans to sell natural gas and oil shale fields to Southwestern Energy Co. for $5.4 billion in its biggest-ever divestment. The transaction includes 1,500 wells and drilling rights across 413,000 acres in the southern Marcellus Shale and eastern Utica Shale in Pennsylvania and West Virginia, Chesapeake said in a statement.

    Southwestern slumped 10 percent to $31.97, while QEP Resources Inc., a natural gas and oil exploration company, jumped 6.8 percent. Baker Hughes Inc., the third-largest oilfield-services provider, sank 3 percent to $52.01 after saying oil prices below $75 a barrel for a few months may lead to reduced spending on energy exploration and production. U.S. crude futures rebounded after slipping below $80 for the first time since June 2012. Brent rose from the lowest in almost four years.

    Netflix, the world’s largest subscription-streaming service, tumbled 19 percent to $361.70 in its biggest decline since 2012. The company blamed a recent $1 price increase for the shortfall, and offered a guarded outlook for this period. Netflix had gained 22 percent this year through yesterday.

    EBay fell 4.7 percent to $47.88. Revenue for the current period will be $4.85 billion to $4.95 billion, the company said in a statement yesterday. Profit before certain items will be 88 cents to 91 cents a share. Analysts on average projected sales of $5.16 billion and profit of 91 cents, according to data compiled by Bloomberg.

    Goldman Sachs fell 2.6 percent to $172.58, the lowest since August, after posting a bigger drop in trading revenue than competitors including JPMorgan Chase & Co. Profit topped analysts’ estimates as firm cut the portion of revenue it set aside for employee pay and reaped gains from investments made with its own money. Trading revenue fell 11 percent from the second quarter, excluding accounting gains and a benefit tied to paying off subordinated debt. JPMorgan and Citigroup Inc. each posted a 2 percent increase.

    United Rentals Inc. jumped 6.7 percent, its biggest gain since July 2013, after revenue and adjusted earnings beat estimates and the company said it accelerated its share buyback program. Stephen Schwarzman, Blackstone Group LP’s chief executive officer, said the recent declines in financial markets are an “overreaction” and the U.S. economy continues to do well.

    “We’ve got an overreaction going on because of health concerns and foreign policy concerns and all this stuff coming together that’s just scaring people,” Schwarzman said on a conference call today with investors and analysts. “There’s this sense that we’re out of control, and that’s being reflected into markets. The U.S. economy is doing quite nicely.”

Have a wonderful evening everyone.

“Good Advice is almost certain to be ignored, but that’s no reason not to give it.” – Agatha Christie 

Be magnificent! 

“The true delight is in finding out rather than in the knowing.” – Isaac Asimov

Brianna

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7