October 18th, 2011 Newsletter
Dear Friends,
Tangents:
A thought:
Time drags you along
“Let me start by asking you a simple question: What time is it right now?” Adam Frank writes for National Public Radio. “To answer this query you probably looked at the clock on your computer or on your cellphone. It told you something like 9:12 a.m. or 11:22 a.m. or 1:37 p.m. But what is 1:37 p.m.? What is the meaning of such an exact metering of minutes?….[D]id 1:37 p.m. even exist 1,000 years ago for peasants living in the Dark Ages of Europe, Song Dynasty China or the central Persian Empire? Was there such a thing as 1:37 p.m. across the millennia that comprise the vast bulk of human experience? The short answer is “no.” But 1:37 exists for you….You feel minutes in a way that virtually none of your ancestors did. You feel them pass and you feel them drag on with all the frustration, boredom, anxiety and anger that can entail. For you, those minutes are real.”
Photos of the day
October 18, 2011
Migrating Common Cranes fly to their night roost at sunset near the village of Linum, Germany. The marshes and lakes in the state of Brandenburg attract tens of thousands of cranes during their autumn migration from their breeding grounds in Russia and Scandinavia to their wintering areas in southwestern Europe. Up to 60,000 birds gather during the peak of migration turning the area into the biggest migration stopover in northern Europe. Thomas Krumenacker/Reuters.
Market Commentary:
Canada
By Kaitlyn Kiernan
Oct. 18 (Bloomberg) — Canadian stocks rose from a one-week low, led by energy producers, as crude oil climbed amid optimism that economic growth will stabilize after Bank of America Corp. reported better-than-estimated earnings.
Suncor Energy Inc., Canada’s largest oil and gas producer, gained 2.8 percent as crude advanced to a one-month high.
Canadian National Railway Co., the country’s largest railroad, led industrials higher as it rose 3 percent. BlackBerry maker Research In Motion Ltd. climbed 3 percent after unveiling a new operating system.
The Standard & Poor’s/TSX Composite Index advanced 130.07 points, or 1.1 percent, to 12,053.11.
“The turnaround has been driven by the energy sector as crude has been creeping up around the prospect of double-dip recessions around the world being less likely,” Timothy Lazaris, chief executive officer of Red Sky Capital Management Ltd. in Toronto, said in a telephone interview. The firm oversees about C$55 million ($54.3 million).
The index declined 1.3 percent yesterday as metals and fuels retreated on concern European officials may not have a final plan to address the continent’s debt crisis this year. The S&P/TSX lost 16 percent from April 5 through yesterday as oil slumped 20 percent and copper sank 21 percent. Energy and raw- materials companies make up 48 percent of Canadian stocks by market value, according to Bloomberg data.
Bank of America Corp., this year’s worst performer in the Dow Jones Industrial Average, swung to a profit from a year- earlier loss on higher revenue, better credit quality and one- time gains, raising hopes that economic growth will stabilize.
The S&P/TSX Energy Index gained 2.4 percent as crude oil advanced. Suncor Energy Inc. jumped 2.8 percent to C$30.60. Canada’s largest oil and gas producer and its partners discovered oil in the Norwegian North Sea in the Butch prospect near the Ula field.
Canadian Natural Resources Ltd., the country’s second- biggest energy company by market value, advanced 2.3 percent to C$32.96.
Enbridge Inc., Canada’s largest pipeline company, rallied 1.6 percent to C$34.90. TransCanada Corp., the owner of Canada’s biggest pipeline system, rose 1.8 percent to C$43.63.
Canadian National Railway Co. led the S&P/TSX Industrials Index higher after Cormark Securities Inc. boosted the railway to “buy” from “market perform,” saying rails will be among the first industries to recover from the economic slowdown.
Canadian National Railway gained 3 percent to C$74.65. Canadian Pacific Railway Ltd., Canada’s second-biggest railroad, rose 4.9 percent to $56.08.
Stocks fell earlier as precious and base metal producers declined on a report that China’s economy grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009. The gain was less than the median estimate of 9.3 percent in a Bloomberg News survey of 22 economists and followed a 9.5 percent increase in the previous three months.
Barrick Gold Corp. lost 1 percent to C$47.79. Goldcorp., the world’s second-biggest gold producer by market value, dropped 2.5 percent to C$47.05. Silver Wheaton Corp., Canada’s fourth-largest precious-metals company by market value, slipped 3.4 percent to C$31.06.
Teck Resources Ltd., the country’s biggest base-metals and coal producer, lost as much as 4.5 percent as copper futures fell before surging to close 1.9 percent higher at C$35.95.
Research In Motion Ltd. advanced 3 percent to C$23.59. The BlackBerry maker, looking to spur consumer interest in its devices after losing sales to Apple Inc. and Google Inc., unveiled a new operating system for its PlayBook tablet computer and new smartphones.
Niko Resources Ltd. surged 8.5 percent, the second-most in the S&P/TSX Index, to C$50.21. The oil and gas producer with operations in South Asia was raised to “outperform” from “market perform” at Raymond James Ltd., which cited improved risks on reserves and exploration potential.
Industrial Alliance Insurance and Financial Services Inc. sank 4.9 percent, the most since July 2009, to C$30.65. The provider of insurance and retirement plans was cut to “hold” from “buy” at Desjardins Securities Inc., which cited the impact of the low-interest rate environment.
Lululemon Athletica Inc. slumped 2.9 percent to C$52.11.
The yoga-wear retailer was rated a new “neutral” at Macquarie Group Ltd, which gave a 12-month price estimate of $51 on the U.S. shares. Macquarie said competition is increasing and the stock is “pricey.”
US
By Rita Nazareth
Oct. 18 (Bloomberg) — U.S. stocks gained, sending the Standard & Poor’s 500 Index to the highest level since August, as Bank of America Corp. paced a rally in financial shares and optimism grew over progress on expanding Europe’s rescue fund.
Bank of America climbed 10 percent after it swung to a profit as credit quality improved. A gauge of homebuilders in S&P indexes jumped 9.6 percent, the most since March 2009, as data showed that industry sentiment increased more than forecast. Caterpillar Inc. and Alcoa Inc. added at least 3.9 percent, pacing gains among companies most-tied to the economy.
Apple Inc. tumbled 5.9 percent after the close of regular trading after profit and sales missed analysts’ expectations.
The S&P 500 added 2 percent to 1,225.38 at 4 p.m. New York time, erasing yesterday’s drop. The benchmark gauge rose to the highest level since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. The Dow Jones Industrial Average gained 180.05 points, or 1.6 percent, to 11,577.05 today.
“We could be into one of those buying stampedes,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview. His firm manages $300 billion. “It feels that the worst is in the rear-view mirror. Housing is not going to be a thing that sucks you down into a recession. Earnings are still going to look pretty good. Something has to happen in Europe.”
The S&P 500 rose from the threshold of a bear market early this month amid optimism over corporate earnings and steps by European leaders to support banks. The rebound brought the gauge close to the top of a price range between 1,074.77 and 1,230.71, where it’s traded for more than two months. The S&P 500 briefly rose above that range, reaching 1,233.10 today.
Profit for S&P 500 companies will climb 17 percent in the third quarter and rise 18 percent to a record $99.76 for all of 2011, according to analyst estimates compiled by Bloomberg. The S&P 500 is trading for 11.1 times forecast earnings for 2012, compared with its five-decade average of 16.4 times reported income, according to data compiled by Bloomberg.
Global stocks rallied. France and Germany are engaged in “intensive talks” on bolstering the European Financial Stability Facility, Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman, said today. He declined in an interview to comment on a report in the Guardian that they reached agreement on increasing the size of the fund, saying he won’t comment on intermediate results of the negotiations.
In the U.S., data showed that homebuilders were less pessimistic than forecast in October, as near record-low borrowing costs and price decreases raised hopes the market will turn for the better over the next six months.
The Morgan Stanley Cyclical Index of companies most-tied to the economy added 3.3 percent. The Dow Jones Transportation Average advanced 3.1 percent. Alcoa gained 5.9 percent to $10.14. Caterpillar climbed 3.9 percent to $84.72. PulteGroup Inc., the largest U.S. homebuilder by revenue, rallied 11 percent to $4.46.
“It’s reality beating investors’ poor expectations,” Jack Ablin, who helps oversee $55 billion as chief investment officer for Chicago-based Harris Private Bank, said in a telephone interview. “That happens particularly with Bank of America, given that everyone assumed for the worst. It’s not a matter of if, it’s just a matter of when the industry recovers.”
The KBW Bank Index rallied 6.1 percent as all of its 24 stocks advanced. The gauge slumped 3.9 percent yesterday.
Bank of America rose 10 percent to $6.64. The provision for loan losses dropped to $3.4 billion from $5.4 billion a year earlier as credit improved in the card unit and commercial lending, the bank said. The card unit swung to a profit in the quarter, while income rose at the deposit unit, global wealth and investment management, and global commercial banking.
State Street Corp. gained 11 percent to $37.49. The custody bank under pressure from activist investor Nelson Peltz to increase profitability said third-quarter profit rose a stronger-than-expected 11 percent as custody assets increased.
Goldman Sachs Group Inc. added 5.5 percent to $102.25 even after reporting its second quarterly loss in 12 years as the firm lost money on investments and revenue declined from trading, asset management and securities underwriting.
“It’s time to get less bearish,” David Kelly, chief market strategist for JPMorgan Funds in New York, said in a telephone interview. “Investors ought to be able to look forward and recognize that the economy does muddle through. There’s a better underlying story for banks and also there’s housing. There’s a realization that at some stage this thing is going to turn.”
International Business Machines Corp. tumbled 4.1 percent to $178.90. The biggest computer-services company missed sales estimates for the first time in five quarters. Revenue showed slowing growth in IBM’s software, hardware and services businesses.
Nasdaq-100 Index futures lost 0.9 percent to 2,342.50 at 5:05 p.m. after the close of regular trading. Apple retreated 5.9 percent to $397.15 as profit missed estimates as the company sold fewer iPhones than analysts’ projected.
Intel Corp. also reported results after the market close.
The shares gained 4.4 percent to $24.43, after rising 0.5 percent in regular trading. The chipmaker forecast fourth- quarter sales that exceeded some analysts’ estimates, citing strong demand for laptop computers in emerging markets.
The S&P 500 may rise about 4 percent this week before the gain ends, according to Tom DeMark, the creator of indicators meant to identify turning points in the price of securities.
DeMark, whose prediction last month that the S&P 500’s decline would stop at 1,076 proved prescient when the index bottomed at 1,074.77, said the rally that lifted the benchmark as much as 14 percent since then will fizzle. The S&P 500 will rise as high as 1,254 before falling at least 5.6 percent, he wrote in an e-mail today.
Have a wonderful evening everyone.
Be magnificent!
An eye for an eye only end up making the whole world blind.
-Mahatma Gandhi, 1869-1948
As ever,
Carolann
Never let your sense of morals
keep you from doing what is right.
-Isaac Asimov, 1920-1992