October 26, 2015 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

A woman stands in a field of fireweed, or Kochia scoparia, on a sunny autumn day at Hitachi Seaside Park in Hitachi, north of Tokyo, Monday. Fireweed is a grass bush that takes on a bright red color in autumn. Thomas Peter/Reuters

A white Bengal tiger cub plays in her enclosure at a private zoo in Felsolajos, Hungary, Monday. The zoo’s two female cubs were born in May.Janos Bugany/MTI/AP

Market Closes for October 26^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell the most in a month, retreating from a two-week high, as oil producers declined and Valeant Pharmaceuticals International Inc. resumed losses.

     Energy shares lost 2.4 percent as a group to lead Canadian equities lower as U.S. crude inventories have risen to the highest levels for the season in 85 years. West Texas Intermediate futures for December delivery traded for 92 cents less than January, the widest spread — also known as contango – – since May.

     The Bloomberg Commodity Index, a gauge tracking a basket of commodities prices from oil to copper, slipped 0.6 percent for a fourth day of losses. Prices are on pace for a fourth straight month of losses.

     The Standard & Poor’s/TSX Composite Index fell 162.76 points, or 1.2 percent, to 13,790.90 at 4 p.m. in Toronto. The gauge has rallied 3.6 percent in October, on pace for the biggest monthly increase since February. 

     Commodities producers retreated, led by declines among oil stocks. Crescent Point Energy Corp. dropped 1.8 percent and Encana Corp. retreated 6.9 percent. WTI crude was down 62 cents to $43.98 a barrel in New York, failing to sustain a rally earlier this month to $50 a barrel amid surging U.S. inventories.

     Valeant lost 6.4 percent. The stock fell as much as 12 percent before briefly erasing those declines earlier in the day as Chief Executive Officer Michael Pearson shot back at critics in a conference call Monday morning, saying the drugmaker had behaved properly in its relationship with specialty pharmacy Philidor RX Services.

     “Our accounting with respect to the company’s Philidor arrangements is fully compliant with the law,” Pearson said in a statement released ahead of the call. “However, other issues have been raised publicly about Philidor’s business practices, and it is appropriate that they be fully reviewed.”

     Shares of Laval, Quebec-based Valeant plummeted 32 percent last week, the most since 1993, after short-seller Citron Research said Valeant is using Philidor to store inventory and record those transactions as sales. Valeant has denied the accusations, saying that sales are recorded only when the drugs are sent to patients. Philidor accounted for about 6 percent of Valeant’s revenue for the nine months ended Sept. 30, Valeant said in a filing to the U.S. Securities and Exchange Commission.

     Smaller peer Concordia Healthcare Corp. fell 5.4 percent today. Concordia and Valeant were the two best-performing stocks in the S&P/TSX through the first half of the year, fueled by aggressive growth-by-acquisition strategies.

US

By Oliver Renick

     (Bloomberg) — A rally in U.S. stocks stalled Monday, as investors assessed recent gains before the latest batch of earnings and a Federal Reserve meeting, with the Standard & Poor’s 500 Index slipping from a nine-week high.

     Technology and energy, two industries that have driven much of the benchmark’s gains as it heads toward its best month in four years, retreated today. Apple Inc. lost 3.2 percent to weigh on tech, as supplier Dialog Semiconductor Plc’s sales and outlook missed analysts’ estimates. Apple is Dialog’s biggest customer. Chevron Corp. fell 2.7 percent with crude oil sinking to a two-month low.

     The S&P 500 declined 0.2 percent to 2,071.03 at 4 p.m. in New York, after last week erasing its losses for the year.

     “Nobody is expecting the Fed to move, but everyone’s going to be looking at the language on whether they say they’re still on target for this year so the markets might be muted until then,” said Thomas Garcia, head of equity trading at Thornburg Investment Management Inc. in Santa Fe, New Mexico, said by phone. “There are some pretty big earnings this week so people will be watching what companies say about third quarter but also what they say about guidance.”

     Pfizer Inc., Ford Motor Co. and Apple Inc. are among more than 160 S&P 500 companies reporting earnings this week. Analysts project profits at the index’s members dropped 6.1 percent in the third quarter, with energy and materials companies showing the steepest decline.

     Two months after the first correction since 2011 broke a yearlong calm in U.S. equities, the S&P 500 is on the march again, bringing its gain from its August low to 11 percent, and within 3 percent of its all-time high set in May. Microsoft Corp., Google parent Alphabet Inc. and Amazon.com Inc. surged on Friday, adding more than $80 billion in combined market value on strong earnings reports.

     The main U.S. stock gauge remains on the path toward its best month since 2011, led by commodities producers, industrials and technology shares, the very groups that fueled the August selloff amid worries that a slowdown in China would hamper a global economic expansion. Since then, concerns have ebbed as central banks signal their willingness to take action to head off risks to growth.

     Equities got an added boost Friday after China cut interest rates for the sixth time in a year. That came a day after the European Central Bank suggested it will bolster stimulus if needed. Investors will look to the Fed’s meeting this week for indications of the trajectory of U.S. interest rates. The probability of a rate increase this month is now only 6 percent, and about 36 percent for December. March is the first month for which traders price in at least even odds of a boost.

     As policy makers prepare to debate a rate move, a report today showed purchases of new homes slumped in September to a 10-month low and the prior two months were revised down. The larger-than-expected decline disrupted a trend of steady improvement this year in the industry

Have a wonderful evening everyone.

Be magnificent!

As ever,

Karen

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7