The Canadian stock market closed higher on Friday in a broad-based advance which was led by mining stocks amid rising prices for commodities.  The S&P /TSX composite index gained 21.69 points to 13,797.59.  The Canadian stock market ended the week 145 points or 1.06% higher, which still leaves the TSX down about 442 points from its highs of the year reached last month, amid a growing conviction that economic growth is not as robust as it was earlier and worries about the European government debt crisis.

The financial sector was down as Royal Bank reported net income of $1.51 billion or $1 per share for the 2^nd quarter, up from earnings of $1.33 billion a year ago. CIBC, Bank of Montreal, TD Bank and National Bank have all reported earnings last week. All except National came in below analyst expectations for earnings.

In the United States the Dow and S&P 500 closed out their 4^th week of losses with a small gain on Friday, but only with the help of a weaker U.S. dollar boosting metals prices and basic materials stocks.  Stock markets were higher amid investor disappointment with the latest pending home sales data. The number of people who signed contracts to buy homes in April dropped 26.5% from a year earlier.  However, another report showing consumer sentiment in the U.S. rose in May as expectations improved. The University of Michigan’s consumer sentiment survey increased to 74.3 in May from 69.8 in April.

The U.S. Commerce Department said that both personal income and spending rose 0.4% in April, in line with what economists expected. Higher food and gas prices accounted for most of the spending increase.

Thin trading before the Memorial Day holiday that will keep U.S. markets closed today did not help.

The U.S. dollar or greenback fell broadly after weaker-than-expected U.S. consumer spending and housing data stoked worries that the economic recovery is losing momentum.

The Dow Jones industrial average added 38.82 points, or 0.31%, to 12,441.58, the Standard & Poor’s 500 Index rose 5.41 points, or 0.41%, to 1,331.10 and the Nasdaq Composite Index gained 13.94 points, or 0.50%, to 2,796.86.  For the week, the Dow lost 0.56%, the S&P shed 0.16% and the Nasdaq dropped 0.23%.

It was the 4^th straight week of losses for both the Dow and the S&P 500. For the Nasdaq, it was the 3^rd decline in the last 4 weeks.

On the macroeconomic front, separate reports showed the U.S. economy remained sluggish early in the 2^nd quarter with high gasoline prices crimping consumer spending and bad weather helping to push home re-sales to a 7-month low in April.

U.S. stocks this week will be hit by data expected to indicate a slowing economic recovery, but a few positive reports may prove enough to draw investors into a market accustomed to negative sentiment. The focus could remain on the economy.  Investors will start the market week with the release of the Chicago purchasing managers index and the Conference Board’s consumer confidence data for May. Wednesday brings the Institute for Supply Management’s manufacturing activity report for May. Weekly jobless claims data will be released on Thursday. Then, on Friday, the ISM will release its services sector activity report for May, and the U.S. Labor Department will release nonfarm payrolls data for May.

Investors will worry about the euro which fell from a two-week high against the U.S. dollar on concern that European governments will struggle to resolve the sovereign debt crisis, damping demand for the region’s assets.   The single currency weakened versus all of its 16 major counterparts after Greek Prime Minister George Papandreou said he’ll press ahead with new austerity measures even as he failed to win backing from opposition parties.  The EU may withhold the next tranche of credit to Greece after a report by an international panel of inspectors concluded that the debt-laden country has missed all the fiscal targets agreed in its rescue plan.

The Canadian dollar could be under additional pressure on commodity markets this week after the Bank of Canada delivers its next announcement on interest rates on Tuesday.  The dollar moved lower for a 4^th week last week, reflecting slowing economic conditions, particularly in the U.S., Canada’s largest trading partner, and doubt about when the Bank of Canada will resume raising interest rates.

No one expects the central bank to hike its key rate on Tuesday but traders will be anxious to read the bank’s statement for clues as to when it will move the rate above 1.00%, where it has been since September of last year.  It was not all that long ago that the Bank of Canada was fully expected to resume raising interest rates in July that would see rates higher by 1.00% by early next year. But slowing economic conditions in much of the world has radically changed that outlook.

There is a concern that the longer the bank keeps rates at these artificially low levels, the more risks there are of having people engage in speculative or high risk activity, perhaps borrowing too much and not saving enough both at the consumer and household level and maybe at the business level as well.  Although, core inflation is still within an acceptable range things can change quick.

Meanwhile, stock market investors will be looking at economic reports this week that are likely to confirm concerns that economic conditions continue to soften.  In Canada, the major report of the week comes out Friday. Statistics Canada is expected to report that the economy expanded at a 4.00% annualized rate in the 1^st quarter.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market closed lower Friday as resource stocks failed to respond to higher commodity prices at the end of another losing week.  The S&P /TSX composite index lost 12.26 points Friday to close at 13,377.16. The higher U.S. dollar also sent the Canadian dollar down 0.68 of a cent to 103.24 cents US.

The American dollar gained ground after the European Union warned that the debt loads of Greece, Ireland and Portugal will be much bigger than previously forecast. The assessment added to fears that international bailouts are failing to solve the region’s debt crisis.

Oil has been volatile for the week after data Wednesday showed that U.S. gasoline demand dropped 2.4% the previous week while oil supplies grew more than twice as much as analysts expected.

Toronto’s main stock index has taken a beating lately, hitting the lowest close in 3 ½ months, as signals that the Chinese economy might be cooling sent commodity prices down. Inflation in China eased in April and China’s industrial output growth was more than a full percentage point below expectations in the same month after a strong showing in March.  The data helped push oil, gold and metal prices sharply lower.   In short, a feeling that global growth is slowing is pushing commodity prices down.  High inflation data from China has forced the country’s central bank to order most banks to raise their reserve requirements in another move to cool the economy and slow growth.

Resource stocks have not benefited and the S&P/TSX index finished the week down 189.44 points or 1.39%, its 3^rd losing week in a row. The index is now down about 66 points for the current calendar year.  The S&P/TSX finished trading last week about 6.25% below the 2011 high of about 14,270 which was reached in early April.

In the United States stocks ended a 2^nd week of losses on a down note on Friday, reflecting growing worries that stocks are about to incur a pullback.

Investors worried that higher inflation could reduce consumer spending.  The American consumer is paying more for gas and food in April, pushing inflation to its highest level in 2 ½ years.  The U.S. Labour Department said the Consumer Price Index increased 0.4% in April. In the past 12 months, prices have risen 3.2%. That’s the biggest 12-month gain since October 2008.  Excluding volatile food and energy, prices moved up 0.2% during April. Gasoline prices have soared more than 33% in the past year.

Investors worried about slowing growth globally, the end of a supportive Federal Reserve policy and the fear of a worsening euro-zone debt crisis are undermining the stock market’s ability to maintain an upward direction.

Recent heavy selling in commodities has prompted several analysts to forecast a pullback in the stock market, noting that much of the stock market’s latest advance has been built on commodity-related stocks.  The Fed’s 2^nd round of quantitative easing has been credited for much of the strength in stocks and commodities since September 2010 as the cash indirectly supports asset prices. The $600 billion bond-buying program is set to end in June.  The Fed is unlikely to proceed with QE3, so as QE2 ends that signifies a tightening of monetary policy which will slow things down.

The Dow Jones industrial average ended down 100.17 points, or 0.79%, at 12,595.75, the Standard & Poor’s 500 Index finished down 10.88 points, or 0.81%, at 1,337.77 and the Nasdaq Composite Index fell 34.57 points, or 1.21%, at 2,828.47.  For the week, the Dow was down 0.3%, the S&P 500 was off 0.2% and the Nasdaq was up at 0.03%.

In another sign of a shift in investor sentiment, leadership in the S&P 500 has moved from cyclical sectors like energy and basic materials to sectors with more stable growth like healthcare and utilities.

The release of housing data and quarterly results from major retailers will likely put a double focus on consumer-driven stocks in the coming week as debt concerns loom.

Today, the National Association of Home Builders is set to release its housing market index for the United States, followed on Tuesday with April housing starts data from the Commerce Department in the United States. On Thursday, the National Association of Realtors will report existing home sales data for April for the United States.  Currently the U.S. housing market is dead which negatively impacts the overall economy including the consumer.

Today we will also see the United States reaching its $14.294 trillion debt ceiling, based on Treasury estimates, prompting the department to begin measures to keep payments current until August.

So far, 453 companies in the S&P 500 have reported quarterly earnings, with 74% beating Wall Street earnings-per-share estimates and 68% reporting sales above estimates, according to FactSet Research.  Of the S&P 500 companies that have already reported, 48 have issued negative earnings outlooks for the current quarter and 29 have issued positive outlooks.

The Canadian stock market is likely face more headwinds this week as a round of volatility in commodity markets threatens to send the resource-heavy equity market further into the red.  Clearly Canada has been a great place to invest in for the 1 ½ years. It was all predicated on global growth and global growth is now increasingly being questioned.

Further losses were triggered by data showing inflation continues be an issue for the Chinese government, oil prices were hit as U.S. gasoline demand dropped while oil supplies grew; interest rates are higher in Asia.  In short, we are supposed to have global growth without inflation however, we are incurring inflation through higher commodity prices and growth is going to slow because the governments are going to fight inflation.  Further depressing commodity prices is a stronger U.S. dollar, which gained ground after the European Union warned that the debt loads of Greece, Ireland and Portugal will be much bigger than previously forecast.  The assessment added to fears that international bailouts are failing to solve the region’s crisis.  Oil and other commodities are priced in U.S. dollars and a stronger currency makes crude less of a bargain for buyers who use other currencies and the price falls.

In Canada, investors will look to the latest inflation data on Friday. The consumer price index is forecast to show a gain of 0.4% after charging ahead 1.1% in March because of higher prices for food and gasoline.  The latest retail sales data will be released on Friday. Statistics Canada is expected to report that sales rose 1.0% in March on higher auto and gasoline sales.

Stock markets will likely have a downside bias for the near-term as investors fail to identify a catalyst that will justify higher prices.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market regained most of the losses it incurred a day earlier on Friday, as stronger than expected North American jobs data from April lifted stocks, but still declined in value for the week.

Statistics Canada reported that the domestic economy created an impressive 58,300 jobs last month, while the U.S. economy added 244,000 jobs in April, the 3^rd straight month of solid hiring. Canada’s employment report was enough to bring the unemployment rate down to 7.6%, matching the lowest jobless level since the early months of the recession.  However, the U.S. unemployment rate ticked up to 9.0% as more Americans resumed looking for work.

The S&P/TSX composite index was up 111.2 points at 13,566.6 or 0.83%. For the week, the TSX was down 378 points or 2.7%. The Canadian dollar added 0.13 of a cent to 103.41 cents US. It had earlier been up more than 1 cent earlier in the trading day.

The positive jobs reports helped lead the advance in stock markets.  Stock sold off for the majority of the week irrespective of the fact that Osama bin Laden was dead and the majority victory for the Tories.  Conversely, investors sold stocks.  Worries about the pace of the U.S. recovery had grown following a run of soft economic data. Commodity prices took the brunt of the sell-off amid worries of waning demand for crude, metals and raw materials.

Oil continued to fall on Friday to cap a brutal week that cut prices by a record of more than $16.75 a barrel, on demand worries and a move by investors to cut commodities exposure.  Selling pressure on oil and other commodities came on several fronts throughout the week. Investors weighed factors from the death of Osama bin Laden to the impact of higher fuel and commodity costs on consumer nation economies to the monetary policy in major countries.

On Friday U.S. crude futures settled down $2.62 at $97.18 a barrel. Volumes were 70% over the 30-day moving average. As mentioned, U.S. crude ended down $16.75 for the week, the biggest weekly drop since the contract began trading in 1983.

Some rumors that Greece had raised the possibility of leaving the euro zone didn’t help the matter.  If Greece were to leave, which is not easy to do, the European banking system would be in bigger trouble, hurting the economy and oil demand.  Concerns about the end of the 2^nd U.S. quantitative easing program in June also weighed on oil prices. The program, in which the Federal Reserve purchased U.S. Treasury debt, flooded markets with cash and helped drive up crude prices,

Investors were watching moves by other big oil consumers. India’s central bank raised interest rates by more than expected on Tuesday, and expectations the second largest oil consumer China could take similar action hit oil prices as well.

Are oil prices going to fall further?

There is a lot of interest and a lot of long positions in oil, which analysts said could suggest even more downside pressure.  Oil volatility measured by the Chicago Board Options Exchange’s index (CBOE) initially declined on Friday after the big jump a day earlier. But the index closed only slightly lower at 41%. It was trading at around 30% just a week ago.  Crude, hit a 2 ½ year high of over US$114 late last week but tumbled nearly 7.0% Thursday on a sharp rise in the U.S. dollar and a jump in applications for unemployment benefits – the commodity dropped more than 15.0% within a week.

Oil prices had rocketed to levels not seen since a record spike in 2008, driven by supply disruptions in Libya and loose U.S. monetary policy. U.S. crude surged over $114, Goldman Sachs, which in April predicted a major correction in oil prices, on Friday said oil could surpass its recent highs by 2012 as global oil supplies keep tightening.  “It is important to emphasize that even as oil prices are pulling back from their recent highs, we expect them to return to or surpass the recent highs by next year,” Goldman Sachs analysts said in a research note.  “We continue to believe that the oil supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan oil supplies remain off the market.”

The drop in oil or crude prices was part of a sharp sell-off in commodities for the week. Analysts say investors got nervous that oil, metals and grains had risen over the past few months to unrealistic heights.  Their rush to sell hit silver prices down 28%, sugar down 13% and natural gas down 10%.  While analysts cited reasons specific to each commodity, they had one common explanation for the pullback, which was the strengthening U.S. dollar.  Commodities such as oil and silver are bought and sold in U.S. dollars. When the U.S. dollar is weak, those commodities look cheaper to investors/buyers of other countries/currencies so they buy. Conversely, when the dollar rises, commodities look more expensive. So they sell.  Speculators, knowing this, tend to sell commodities and buy dollars if they anticipate the dollar will rise. This increases the volatility in commodity prices.

Commodity prices began to rise in late August of last year. That was when the U.S. Federal Reserve disclosed it’s intention to start a US$600-billion government bond-buying program designed to push down interest rates, boost stock prices and jolt the economy a.k.a. QE2.  However, the U.S. dollar fell as a result. Investors knew the Fed would be flooding financial markets with U.S. currency. Many of those dollars jumped into commodities, pushing commodity prices even higher.  With demand starting to weaken investors have started to sell their positions.

Still, traders say this week’s sell-off is very likely just a pause in a long-term upward trend for commodity prices. While prices could fall in the near-term, a stronger U.S. economy and the rapidly growing economies of Asia will continue to need food, energy and raw materials.

Conversely, the steep drop in oil prices last week was welcomed by the majority of investors because crude above $114 a barrel may hurt the global economy.  Oil prices above $100 a barrel is not ideal, an OPEC delegate said on Friday.  “The price had been going too high which is not good for consumers because it can affect the world economy,” said the delegate. “A price in the range of $90 to $100 will be ideal.”

The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to meet on June 8^th in Vienna and is likely to keep its formal output policy unchanged, despite the loss of Libyan supplies.

In the United States an unexpectedly strong report on U.S. payrolls helped equities bounce back on Friday from 4 days of losses, tempering investor worries that stocks could suffer the sharp declines seen last week in commodities.  Stocks held strong gains for most of the day but ended the week down more than 1%. Speculation that Greece might leave the euro zone late on Friday caused stocks to trim gains and gave investors something to worry about as the strength of the market’s rally comes into question.

However, the S&P held above key support levels, indicating the week’s retreat could set the stage for further gains in contrast to the painful declines in silver and oil markets.  Corporate earnings has been pretty strong, and stocks look like they are more attractively valued versus commodities.

The Dow Jones industrial average gained 54.64 points, or 0.43%, to 12,638.81, the Standard & Poor’s 500 added 5.10 points, or 0.38%, to 1,340.20 and the Nasdaq Composite rose 12.84 points, or 0.46%, to 2,827.56.  For the week the Dow lost 1.3%, the S&P fell 1.7% and the Nasdaq Composite dropped 1.6%.

The S&P 500 held above important technical levels with the week’s low just below 1,330 and Friday’s close above 1,340. On a weekly basis this 1,330 area is a very good support for stocks.

The CBOE volatility index rose 1.1% to 18.40, its highest closing level since March 28^th of this year. The index rose 24.7% last week, its biggest weekly percentage gain in almost a year. A rise in the VIX means investors will pay more for protection or insurance against their equities exposure.

Friday also marked the 1-year anniversary of Wall Street’s “flash crash” when nearly $1 trillion was erased from the U.S. stock market in a matter of minutes before the market bounced back. The crash diminished many investors’ confidence in the market.

As mentioned companies created jobs at the fastest pace in 5 years in April, pointing to underlying strength in the economy even as the jobless rate rose to 9.0%.  Private sector hiring, including a big jump at retailers, boosted overall nonfarm payrolls by 244,000, the largest increase in 11 months, the U.S. Labor Department said on Friday. Economists had expected a gain of only 186,000.  The private sector created 268,000 jobs, the most since February 2006, while government payrolls shrank.  The data backed views the economic recovery would regain speed this quarter after stumbling in the 1^st quarter of the year. Earlier in the week, other reports pointed to a slowing in the employment market.

There is a sustained pick-up in hiring which suggests that businesses have gained enough confidence to look past short-term fluctuations in demand and hire.  While the economy has created jobs for 7 straight months, gains remain too meager to make much of a dent in the pool of 13.7 million Americans who are out of work.  A recent spike in 1^st time applications for state unemployment benefits caused some economists to worry that job growth could slow in May and June. Initial claims jumped to an 8 month high last week.

The report capped a good week for President Barack Obama, whose approval ratings received a lift from the killing of Osama bin Laden. A healthier jobs market could prove key to his hopes to win reelection in 2012.

The relatively vigorous expansion in payrolls in April, if sustained, could encourage some members of the Federal Reserve to begin pushing for interest rates hikes.  New York Federal Reserve Bank President William Dudley minimized any move soon toward tightening saying the economy has a “considerable way to go to meet the Fed’s dual mandate of full employment and price stability.  Most economists agree, noting that there is still a huge amount of slack in the employment market and wage growth remains subdued.  A Reuters survey of economists at top financial institutions showed many expected the U.S. central bank to raise benchmark rates by the end of the 3^rd quarter of 2012.

Only a fraction of the more than 8 million jobs lost in the 2007-2009 recession have been recovered. Even at April’s relatively rapid rate of job growth, it would take nearly 2 ½ years to reclaim all those jobs.

This morning stocks are posting some small gains but commodity prices have firmed up with oil prices up 2.5%.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market took a last minute turn into positive territory Friday as commodity prices jumped late in the day to overcome a drop in the shares of stock market heavyweight Research in Motion (RIM).  The S&P /TSX composite index closed up 50.4 points at 13,944.79 after spending most of the day down.

The index ended the week down less than 0.20% and ended April down about 0.44%.

The Canadian dollar rebounded to end the day at 105.66 cents U.S., the highest close since November 9, 2007.  Canada’s currency jumped along with gold and other commodities as the American dollar lost ground.  Gold ended the week up $25.20 at a new record close of US$1,556.40 per ounce, gaining $47.30 on the week from a new high Monday of $1509.10.  Oil was up $1.07 to US$113.93 a barrel. Copper, however, slipped to $4.17 on continued fears that China might move to slow its economy, in turn impacting resource demand.

Investors have been digesting positive earnings as well as some disappointing economic data from both sides of the border.

Statistics Canada released a report saying real Gross Domestic Product (GDP) fell 0.20% in February after a 0.5 0% increase in January.  Most economists had expected GDP would remain flat after consecutive 0.50% gains in December and January. However, there seemed to be minimal concern that February’s results were a sign of a wider slowdown to come. The 1^st quarter GDP should still come close to 4.0% if there is a rebound in March.

In the United States stocks rose on Friday on strength from Caterpillar and other industrials, lifting the Dow and Nasdaq to their best monthly performance since December.  Heavy machinery manufacturer Caterpillar Inc. led the way after reporting a fivefold increase in profit and raising its full-year forecast.

Now that earnings are coming in, analysts are telling you that once some of these negative issues subside i.e. sovereign debt, Middle Eastern tensions etc…. the stock market is going to find the next bull run.

The blue-chip Dow average climbed 4% for the month while the S&P 500 rose 2.8% and the Nasdaq gained 3.3%.  Concerns that the stock market would pull back after earnings are somewhat offset by favourable corporate outlooks and expectations for continued easy money policies from the Federal Reserve that have fueled investor appetite in speculative assets.

The Dow Jones industrial average gained 47.23 points, or 0.37%, to 12,810.54, the Standard & Poor’s 500 Index rose 3.13 points, or 0.23%, to 1,363.61 and the Nasdaq Composite Index added 1.01 points, or 0.04%, to 2,873.54.  For the week, the Dow rose 2.4%, the S&P 500 gained 2.0% and the Nasdaq advanced 1.9%.

As mentioned robust corporate earnings, ample liquidity from the Federal Reserve and the prospect of ultra-low interest rates for the rest of the year have sparked bullishness, pushing the Nasdaq to a 10-year high and lifting the S&P 500 more than 8.0% this year. The major U.S. stock indexes also hit new yearly highs during the week.

With May, the market is heading into a typically weak period. May has been the 4^th weakest month for the Dow, averaging a 0.2% gain since 1950, according to the Stock Trader’s Almanac. It also normally marks the start of the worst 6 months of the year for the industrials.

The U.S. economy is not fully recovered from its deep recession, with housing still weighing on growth, Federal Reserve Chairman Ben Bernanke said on Friday in a speech spelling out ways the U.S. central bank has studied lower income communities.  “Our economy is far from where we would like it to be,” he said in prepared remarks to a conference.

The Fed earlier in the week said it will see its $600 billion bond buying program, launched in November to spur a weak recovery, through to its planned conclusion at the end of June.

The world’s largest economy grew at a sluggish 1.8% annual rate in the 1^st quarter of the year, but unemployment is still 8.8%.

The depressed housing market is holding back the economic recovery, Bernanke said. Home foreclosure rates remain high and many families find themselves owing more for their homes than the homes are worth.

With rising prices fueling concern about inflation, the Fed is under some pressure to tighten policy after unprecedented and aggressive easing measures. Several Fed officials believe the central bank should act quickly to pare its bloated balance sheet and other major central banks around the world have begun to raise interest rates in response to price pressures.

However, the Fed made clear through a statement and a press conference by Bernanke on Wednesday that with a high jobless rate, extensive lost wealth, and inflation levels still not much higher than historic lows, the central bank has no immediate plans to withdraw support.

The death of al-Qaida leader Osama bin Laden has helped lift the mood in the markets all around the world Monday at the start of an extremely busy week of economic news.

President Barack Obama’s announcement that the man who inspired the deadly September 11, 2001, terror attacks in the United States had been killed in an operation by special forces in Pakistan, prompted an increase in investors’ appetite for risk. That usually benefits assets like stocks but dents widely-considered financial safe havens, such as gold.

Futures indicate the S&P 500 may advance when markets open today, following a 4^th day of gains on April 29 after companies such as Caterpillar Inc. and Goodyear Tire & Rubber Co. reported earnings that topped analysts’ estimates. Chesapeake Energy Corp., Anadarko Petroleum Corp. and Loews Corp. are among 13 companies in the S&P 500 scheduled to release quarterly earnings today.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market advanced last Thursday prior to the Easter long weekend.  Mining and energy stocks pushed the Toronto-led advancers as a weaker U.S. dollar helped push up prices for oil and metals.  The S&P /TSX composite index rose 74.54 points to 13,972.02 or 0.52% as investors also took in positive earnings news.

The U.S. dollar has been under selling pressure for most of the week after ratings agency Standard & Poor’s said it was downgrading its outlook on U.S. government debt.  Since the majority of commodities are priced in U.S. dollars, a lower U.S. dollar makes buying and investing in commodities more attractive since any increase in the spot price is being offset by a decrease in the U.S. currency for international buyers.

Oil is up about 33% since mid-February, sparked by a civil war in Libya and unrest in other Mideast countries.  The gold sector gained as the June gold contract on the Nymex closed up $4.90 to a record high close of US$1,503.80 an ounce.

There was plenty of positive earnings news to take in but investors were hard to please after 2 days of gains on Toronto and New York markets.

The TSX gained 1.25% for the week as commodity stocks ran ahead along with prices for oil and metals as the U.S. dollar gave up gains for most of the week.

In the United States U.S. stocks posted their 1^st positive week in 3 as more healthy earnings news lifted Wall Street on Thursday, though gains were limited with another 180 S&P companies due to report their earnings this week.  Last week Apple’s blowout results and strong reports from a number of industrials kept sentiment on the bullish side, after investors were on guard for disappointments headed into this week.

An increase in jobless claims and lower factory activity implies that the economy is still struggling.  Earnings results that fell below expectation from General Electric and McDonald’s also helped keep gains in check. The S&P 500 ran into resistance close to 1,340, a level that has triggered selling several times this month. Some see a failure to convincingly rise above 1,344, the recent high in the benchmark, as a bearish technical signal.

The Dow Jones industrial average was up 52.45 points, or 0.42%, at 12,505.99 and the Standard & Poor’s 500 Index was up 7.02 points, or 0.53%, at 1,337.38 and the Nasdaq Composite Index was up 17.65 points, or 0.63%, at 2,820.16.

The Dow climbed as high as 12,506.06, its highest intraday level since early June 2008.  For the week, both the blue-chip index and the S&P 500 are up 1.3% while the Nasdaq, lifted by strong tech results, rose 2%.

The U.S. dollar hovered around 3-year lows on Friday and looked set to come under further pressure this week, while a stronger yen weighed on Tokyo stocks.

The dollar index was steady at 73.99 against a basket of major currencies after slipping to its lowest since mid-2008 on Thursday, weighed down by expectations that the Federal Reserve will keep interest rates at record lows for some time to come and by bitter divisions in Washington over how to slash the gaping budget deficit.

Analysts said it could extend recent losses next week, with all eyes now on its record low of 70.698 struck in March 2008.

The biggest reason behind the fall is waning investor confidence in U.S. assets. The market is waking up to the fact that fiscal problems are not limited to euro periphery countries.

Adding to pressure on the dollar, data overnight showed the U.S. economy was struggling to regain momentum.  Factory activity in U.S. Middle Atlantic states slowed sharply in April, new jobless claims fell less than expected and other reports showed steep declines in home prices in February.  Data this week is expected to show U.S. growth slowed significantly in the 1^st quarter but is still positive.

This week financial reports from Canadian companies and data showing how much the Canadian and U.S. economies are growing will give investors more information to consider and will influence the direction of stock markets.  Earnings reports are coming from the resource sector.  Hopes are high after mining sector giant Teck Resources delivered earnings last week that beat analyst expectations. Investors are also looking ahead to the Fed interest rate announcement on Wednesday. The U.S. Federal Reserve is universally expected to leave interest rates near zero for some time yet, another reason why the greenback got beaten up last week, along with Standard & Poor’s downgrade of its outlook of U.S. debt.

The interesting aspect of the Fed meeting will be the press conference.  The presentation could be as interesting as the message itself as the Fed embarks on a radically different way of delivering its announcement.  The Fed said in March that chairman Ben Bernanke would hold 4 regular press briefings a year following the announcement and April is the 1^st such event.

Investors will receive the latest growth data for the American economy on Thursday.  It is expected that Gross Domestic Product (GDP) grew at an annualized rate of 3% in the 1^st quarter, which would represent a dip of a 0.10% from the 4^th quarter of 2010.  Expectations for Canadian economic growth during February are minimal.  Statistics Canada is expected to report that GDP growth was likely flat following a 0.5% rise in January.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market closed higher Friday amid rising oil and mining stocks as a weak American dollar helped send oil prices higher and gold to new record highs.  The S&P /TSX composite index jumped 100.66 points or 0.71% to 14,208.43.

Higher commodity prices and the declining U.S. dollar or greenback pushed the Canadian dollar up 0.12 of a cent to 104.45 cents US after earlier rising to almost 1.05 cents, the highest in 3 ½ years.  The dollar rose despite a weaker than expected Canadian employment report for March.  Statistics Canada said the economy lost a net 1,500 jobs last month, the 1^st monthly decline since last September although the unemployment rate did slip to 7.7%. Economists had expected an overall gain of about 30,000 jobs in March.

There was some concern earlier, when Japan had an earthquake and tsunami that global economic growth would slow.  Investors are finding that is not the case.  In short, you are getting more investor confidence regarding sustained demand for commodities which will keep commodity prices firmer.

Stock market performance has been weaker outside of the resource sector which have benefited from a large increase in oil prices.

Investors also breathed a sigh of relief that a strong aftershock in Japan did not cause much damage. The best news was that there was no fresh damage at the Fukushima Dai-ichi nuclear power complex, where workers have been frantically trying to control overheated reactors since they lost cooling systems in last month’s tsunami.

The TSX gained 0.55% for the week.

There was also good news from the Canadian housing sector.  Canada Mortgage and Housing Corp. said that the seasonally adjusted annual rate of housing starts for all types of housing rose to 188,800 units nationally in March, due to multiple dwelling starts in urban areas and single-unit starts in rural areas.

In the United States stocks fell late on Friday as a spike in oil prices revived worries that inflation would derail the recovery, jolting a market that had been treading water ahead of corporate earnings.  The uncertain outcome of budget talks in Washington and the prospect of a U.S. government shutdown as a midnight deadline loomed spurred investors to buy protection ahead of the weekend.

The jump in oil prices drove down shares of airlines and transportation companies.  Oil prices closed at the highest level in 32 months, as the weak U.S. dollar drove up commodities and intense fighting in Libya raised fears of prolonged supply cuts.  The Dow Jones industrial average was down 29.59 points, or 0.24%, at 12,379.90, the Standard & Poor’s 500 Index was down 5.36 points, or 0.40%, at 1,328.15 and the Nasdaq Composite Index was down 15.73 points, or 0.56%, at 2,780.41.  For the week, the Dow rose 0.03% while the S&P 500 and Nasdaq each lost 0.3%.

The S&P faces resistance around 1,345, near its 2011 high. Many analysts believe earnings could be the catalyst that pushes the benchmark index through that resistance.  Bullishness has risen to levels not seen since last December before earnings, according to a survey by Investors Intelligence.

Copper rose 2.5% while gold hit record highs on Friday and silver reached its strongest level since early 1980, as investors snapped up inflation-sensitive raw materials as a hedge.

A last-minute budget deal forged with tough bargaining averted an embarrassing U.S. government shutdown, cut billions in spending and provided the first major test of the divided government.  Working late into Friday night, congressional and White House negotiators finally agreed on a plan to pay for government operations through the end of September while trimming $38.5 billion in spending.  Actual approval of the deal is expected in the middle of this week.  “Americans of different beliefs came together again,” President Barack Obama, a Democrat, said from the White House.

President Barack Obama and congressional leaders tried to avert a government shutdown that all sides say would inconvenience millions of people and damage the economy.  Amid the biggest clash yet between Democrats and the resurgent Republicans who control the House of Representatives, Obama had warned that a shutdown would damage the economy’s recovery by putting an estimated 800,000 government employees out of work.

The deal marked the end of a 3-way clash of wills. It also set the tone for coming confrontations over raising the government’s borrowing limit, the spending plan for the budget year that begins October 1^st and long-term deficit reduction.

More budget battles are expected.  House Republicans intend to pass a 2012 budget in the coming week that calls for sweeping changes in the federal health programs for the elderly and needy families, and even deeper cuts in domestic programs to gain control over soaring deficits.  In the Republican radio address, House Budget Committee Chairman Paul Ryan warned of a coming crisis.  “Unless we act soon, government spending on health and retirement programs will crowd out spending on everything else.” Ryan said Saturday.  That debate could come soon.  The Treasury has told Congress it must vote to raise the debt limit by summer. Republicans hope to use this issue to force Obama to accept long-term deficit-reduction measures.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market closed higher Friday as a stronger than expected U.S. employment report firmed convictions that the economic recovery is on track.  The S&P/TSX composite index gained 14.05 points to 14,130.15, off early highs as investors took some profits heading into the weekend.

The Canadian dollar rose 0.55 of a cent at 103.69 cents U.S., the loonie’s highest level since November 2007.

The U.S. Labour Department reported that the economy created 216,000 jobs last month, which was slightly above expectations. The jobless rate edged down a 1/10^th of 1.0% to a 2 - year low of 8.8%.  The macro employment figures often set the stock market tone for the near term and could have an even bigger impact this time as investors gauge when the U.S. Federal Reserve will begin raising interest rates (or stop printing money with their bond purchase program or Mutative Easing (QE) 2).

Also, a key measure of American manufacturing came in slightly better than expected. The Institute for Supply Management’s (ISM) index on the sector came in at 61.2. A reading of 61 had been expected.

The TSX ended the week up 0.64% as investors look past events in the Mideast and Japan and instead focus on economic fundamentals.  The index was up about 5.0% on the quarter. Given the many macro negative events that were endured by the stock market in the opening quarter, I think the performance of stock market was very good and to some extent unexpected.

In the United States stocks started a traditionally healthy month strong on Friday after solid jobs figures, but the S&P 500 may need help to break to new multi-year highs.  The S&P hovered near 1,333, a significant level as it represents double the 12-year low hit in March 2009. It is close to the 1,344 representing the S&P’s 2011 high; it’s highest since June 2008.

Strong job growth and supportive comments on Fed policy from influential New York Fed Bank President William Dudley were supportive, but the market is looking to forthcoming earnings to kick the rally into a higher gear.  Once we get to earnings and get confirmation companies continue to show strength, analysts think we will make new highs.  However, a couple of weeks of consolidation may come to fruition.

The Dow Jones industrial average hit 12,419.71, it’s highest intraday level going back to June 2008 before closing up 56.99 points, or 0.46%, at 12,376.76, the Standard & Poor’s 500 rose 6.58 points, or 0.50%, to 1,332.41 and the Nasdaq Composite gained 8.53 points, or 0.31%, to 2,789.60.  For the week, the Dow gained 1.3%, the S&P added 1.4% and the Nasdaq rose 1.7%.

April is the best month for the Dow industrials going back to 1950, with an average gain of 2%, according to the Stock Trader’s Almanac.

Stock markets will look set to extend gains this week after signs the U.S. economic recovery is gaining momentum.  As mentioned, investors pushed aside concerns about fighting Libya and the aftermath of the Japanese earthquake last week to push stocks higher on what was perceived to be strengthening economic fundamentals.  The important point to remember is that the U.S. recovery is still grinding forward.

On Tuesday, investors will be looking to the minutes from the last Federal Reserve meeting in the United States on interest rates. A move in raising rates from near zero is considered highly unlikely but traders are starting to feel the Fed may hike rates at the end of the year, as opposed to 2013, amid a stronger economy and inflation driven higher by rising energy prices.

The improvement in the employment market provides fuel for an already lively debate at the Fed over how soon the U.S. central bank should withdraw its extensive support for the economy.  High unemployment and a lack of wage gains argue for keeping supports in place, in the view of some officials. Others worry keeping interest rates close to zero for too long will provide a spark for inflation.

In a sign the central bank is unlikely to rush to the exits, the head of the powerful New York Federal Reserve Bank on Friday pushed back against the hawkish rhetoric from some counterparts, saying the pick-up in job growth was welcome but not a reason to reverse course.  “We are still very far away from achieving our dual mandate of maximum sustainable employment and price stability,” New York Fed chief William Dudley said.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market was higher on Friday led by energy shares.  The S&P /TSX composite index gained 10.02 points to 14,039.39 on the day.  On the week the Canadian stock market was up 249.76 points or 1.81%.

Stock markets have largely recovered from the initial shocks of the uprising in Libya which gained momentum about a month ago and then the Japanese disasters, which hit March 11^th.  Initially, investors expected a worst case scenario which with time failed to materialize.  We have seen supply disruptions from Libya, for example, but we have not seen disruptions from Saudi Arabia. The situation in Japan is quite bad especially the situation at the nuclear plant.  However, you look beyond the nuclear plant and conclude that maybe it is not that bad and they will recover.

On Friday the energy sector rose 0.82% as oil prices declined slightly toward US$105 a barrel as political upheaval in the Middle East and Libya keep crude near 2-year highs.  Crude prices have jumped 25% since protests against Libyan leader Moammar Gadhafi that began in mid-February escalated into a rebellion and shut down most of the OPEC member’s 1.6 million barrels per day of crude output. There are also worries that unrest could spread to other oil-rich countries in the Persian Gulf, such as Saudi Arabia.

On Friday we also saw a stronger U.S. dollar which pushed the Canadian currency lower as the Conservative government lost a non-confidence motion in the Commons, paving the way for an election in early May.   Fortunately or unfortunately, investors are not paying much attention to Federal politics in Canada so it will remain to be seen if Federal politics has any impact on Canadian capital markets or not.

Wall Street advanced for a 3^rd straight day on Friday, giving the S&P its best weekly performance since early February, but global uncertainty persisted.  The 3 major stock indexes posted weekly gains after 2 straight weeks of declines brought on by the Japan earthquake, turmoil in the Arab world and a resurfacing of European debt problems.

Helped by a rise in technology shares after an upbeat outlook from Oracle Corp, the S&P notched its best week since early December. The stock market’s ability to withstand recent bad news, spurred some questions by analysts about the rally’s strength.  The Chicago Board of Options Exchange (CBOE) Volatility Index posted its 2^nd worst 7-day decline as investors dropped anxieties about the global tumult.

Oracle’s stock climbed and was the Nasdaq’s most actively traded name a day after forecasting a rise in new software sales for its current fiscal quarter. The outlook fueled hopes that a global resurgence in technology spending remains intact.

The Dow Jones industrial average gained 50.03 points, or 0.41%, to 12,220.59, the Standard & Poor’s 500 Index rose 4.14 points, or 0.32%, to 1,313.80 and the Nasdaq Composite Index added 6.64 points, or 0.24%, to 2,743.06.  For the week, the Dow gained 3.1%, the S&P climbed 2.7% and the Nasdaq advanced 3.8%.

On the economic data front, the Commerce Department reported that the U.S. economy grew more quickly than previously estimated in the 4^th quarter of 2010 as businesses restocked shelves to meet rising demand.  U.S. consumer sentiment in March fell to its lowest level in more than a year as gasoline and food prices rose, according to the latest consumer survey from Thomson Reuters and the University of Michigan.

U.S. stock index futures rose this morning, building on 3 days of gains, though developments in Japan and Libya remained in view, suggesting further volatility ahead.  Reports of soaring radiation levels at a damaged nuclear plant in Japan renewed worries over the country’s reactors after an earthquake and tsunami.  In the Middle East and North Africa, violence spread as rebels in Libya pushed west over the weekend to retake a series of towns from the forces of Muammar Gaddafi. In Syria, President Bashar al-Assad deployed the army in the country’s main port of Latakia for the 1^st time after nearly 2 weeks of protests spread across the country.

The issues surrounding Japan’s nuclear disaster and civil unrest have pressured stock markets in recent weeks but much of those losses have been recouped.  However, those issues are still lingering with the market.

Considering how low the volume levels are in the stock market it will be interesting to see if this market can continue to advance with conviction in the short-term.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

The Canadian stock market was higher Friday as investors bought up beaten down stocks for a 2nd day after Libya declared a ceasefire in its fight against rebel forces and G7 countries pledged to support the Japanese economy.

The S&P/TSX composite index moved 43.48 points higher to 13,789.63 after Libya’s foreign minister, Moussa Koussa, said the country was stopping all military operations against rebel forces.

The move was good news for stock markets that have seen huge swings in volatility as investors try to come to grips with the economic devastation from a massive earthquake and tsunami which wiped out much of Japan’s industrial northeast and heavily damaged a nuclear power plant.

The Canadian dollar advanced after G7 countries, including Canada, pledged concerted intervention to halt the yen’s rise.  The yen surged to record highs last week due to its status as a safe haven for investors even when the emergency is in Japan.

Oil prices quickly declined by about US$2.50 following the Libyan ceasefire announcement but prices later recovered amid uncertainty that Libya would actually follow through.  During the weekend they did not ‘model’ compliance.

Some of these geopolitical risks may be removed but there is still a lot of geopolitical risk in the price of oil since the geopolitical risk is not just limited Libya.

The ceasefire announcement came after the UN Security Council on Thursday authorized “all necessary measures” short of a ground offensive to stop the forces of Libyan leader Moammar Gadhafi from snuffing out a month-long uprising.

Fierce fighting in Libya has damaged oil operations and cut most of the country’s 1.6 million barrels a day of crude output.

Oil had also risen amid a violent crackdown on anti-government protesters in Bahrain, raising concerns about supply disruptions from the Persian Gulf.

Investors also kept an eye on Japan’s nuclear crisis as military fire trucks sprayed seawater for a 2nd day on the stricken Fukushima Dai-ichi nuclear complex in an attempt to prevent its fuel rods from overheating and spewing dangerous radiation.   The nuclear plant’s operator, Tokyo Electric Power Co., hoped to finish laying a new power line to the plant to allow operators to restore cooling systems. But it was not clear if the cooling systems would still function.

The benchmark Nikkei 225 in Tokyo rose 2.7% following the G7 moves to stabilize the yen, capping a hard week that saw the Japanese market lose 16% Monday and Tuesday.

Despite the high volatility, the TSX ended the week up 0.77% following a 4% slide earlier in the week.

Although stocks gained, investors were reluctant to make big bets due to turmoil in the Middle East and Japan’s nuclear crisis.

In the United States, the S&P and Dow ended lower for the 2nd straight week as volatility spiked. The 2-day rally that ended the week wasn’t enough to offset losses early in the week that briefly erased the indexes’ 2011 gains.  Although, many investors still believe that stocks will end 2011 on a positive note!

Market participants are bracing for more volatility, judging by the elevated levels in the Chicago Board Options Exchange (CBOE) Volatility Index or the VIX, which fell 6.4% on Friday but is up 23% on the week.  The VIX index is Wall Streets favourite measure of implied risk within the stock market.

The stock market is coming to grips with the fact that from “an economic perspective”, the issue in Japan won’t derail the global recovery.

Bank shares jumped as the Federal Reserve in the United States announced it will allow some U.S. banks to boost or restart dividend payments. Wells Fargo and JPMorgan Chase immediately announced dividend increases.  This is certainly very positive.

The Dow Jones industrial average was up 83.93 points, or 0.71%, at 11,858.52, the Standard & Poor’s 500 Index was up 5.49 points, or 0.43%, at 1,279.21 and the Nasdaq Composite Index was up 7.62 points, or 0.29%, at 2,643.67.

The Dow fell 1.5% in the week while the S&P was off 1.9% and the Nasdaq, in its 4th straight down week, sank 2.6%.  The S&P 500 has slumped 3.2% since March 4^th the biggest 2-week decline in 7 months. The index plunged 3.6% between March 11^th and March 16^th following the 9-magnitude earthquake that was Japan’s largest on record. It erased its annual gain after being up 6.8% year-to-date on February 18^th.  The S&P 500 has now hit the lowest valuation since November at 14.7 reported earnings, according to data compiled by Bloomberg.  Investors who were optimistic before the crisis at Japan’s nuclear plant should stick with their outlook and buy stocks as earnings expand, even after the biggest surge in volatility since last May (although, expect volatility to remain elevated).

Canada’s inflation rate excluding volatile items like gasoline slowed in February to a record low on a drop in prices for hotels following last year’s Vancouver Olympics, government figures showed. The so-called core inflation index, which excludes volatile items, rose 0.9% in February from a year earlier after a 1.4% gain in January, Statistics Canada said Friday. That’s the lowest rate on record for the index that the government agency began tracking in 1984.

This will keep the pressure off the Bank of Canada to resume interest rate increases. Governor Mark Carney has kept the central bank’s benchmark policy rate at 1% since last September, saying increases from this level would be “carefully considered.”   Economists anticipate the central will begin raising interest rates in the second quarter of this year, according to Bloomberg surveys. It is also clear that higher inflation as a result of higher food & commodity prices will benefit Canadian stock markets.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

North American stocks are set to tumble more than 2% at the open this morning, tracking global equities sharply lower as Japan’s looming nuclear crisis looked set to pushing capital markets into a period of further declines.

A Japanese nuclear power plant sent low levels of radiation floating toward Tokyo, prompting people to flee the capital and others to stock up on essential supplies.

U.S. shares seen as exposed to the disaster as well as economically sensitive stocks plunged. Insurer American International Group (AIG) was down 4.7%, while General Electric Co. (GE) dropped 5%.

In light of what could be the worst nuclear crisis since the Chernobyl disaster in 1986, investors questioned the nuclear industry’s growth prospects as shares in the sector slid. The Global X Uranium exchange traded fund fell 15.3%.

Japanese stocks slid 10.6%, posting their worst 2-day losing streak since 1987. European shares dropped 3.5%, led by nuclear-related utilities, luxury groups and assurance companies.

A prolonged crisis could cause consumers and businesses to cut spending and the market could have further to go down.

In order to avoid unsettling capital markets even further, the U.S. Federal Reserve was now more likely to leave its monetary policy statement unchanged later today.

Before this tragedy there was an outside chance that the Fed was going to be a bit more hawkish due to increasing oil prices and due to the growing inflationary concerns.

Stock exchanges enforced short-sale restrictions against many Japanese and nuclear industry-related exchange traded funds.

Oil and other commodity prices fell as investors feared Japan’s crisis would hit global growth.  Oil slid 3.4% to just below $98.

Adding to market jitters about unrest in the Middle East and North Africa, Bahrain declared martial law on Tuesday, a day after Saudi forces arrived in the Sunni-ruled kingdom to help restore calm following weeks of protests by the island’s Shi’ite Muslim majority.

Stocks markets really dislike uncertainty and it will take a couple of days or weeks before there is some resolution to the geopolitical and natural disasters around the world.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner