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WEEKLY UPDATE – STOCKS HIT BRAKES HEADING INTO WEEKEND
The Market View:
Last week was a tale of central banks, causing stocks to move cautiously into the two-day meeting of U.S. Federal Reserve officials, cheering their decision and then heading back down the cautious trail as the…
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A Few Things to Consider:
The Russell 2000 Small Cap Index (RUT) nearly erased all the losses from the prior three weeks, gaining 26.26 points (+1.92%) to climb back near its all-time record high. Unlike its larger counterparts,…
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Thoughts for the Week: Why You Should Love March Madness:
For the college basketball faithful, this is the happiest time of the year. The annual NCAA men's basketball tournament, dubbed "March Madness" got underway on Thursday with 68 teams…
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Forex & Commodity Snapshot:
The Canadian Dollar picked up some ground again against its US counterpart, appreciating last week by 0.71% to US$0.7480271.
April Gold futures were the most actively traded, rising $28.80 per ounce, or 2.40%, to $1,230.20.
May Silver futures were the most actively traded, gaining $0.49 per ounce, or 2.90%, to $17.413.
May Copper futures were the most actively traded, advancing $0.0965 per pound, or 3.72%, to $2.6915.
April West Texas Intermediate Crude futures were the most actively traded, edging up $0.29 per barrel, or 0.60%, to $48.78.
Equity Market Snapshot: (All percentages on a weekly basis unless otherwise noted)
Shares of Mobileye (NYSE:MBLY, +28.01%) shot ahead after news hit that the Israeli autonomous vehicle technology firm agreed to be acquired by U.S. chipmaker Intel (NYSE:INTC, -1.78%) for $63.54 per share in a deal worth about $15.3 billion. The frothy price tag is likely to further push valuations of companies in the self-driving car space higher and heat up the race by major automakers to secure technology for their own. Mobileye brings to Intel a portfolio of IP in the space, including cameras, sensors, GPS, machine learning, cloud software and data management, amongst other things.
In the latest sign that the fintech space remains hot, U.S. investment firm Vista Equity Partners said it is buying DH Corp. (TSX:DH, +9.59%) in a deal valuing the Canadian company at C$4.8 billion. Vista intends to combine DH with Misys, a UK-based financial software portfolio company of Vista. Vista said it will pay C$25.50 per DH share, representing an 11% premium from the day prior closing price.
Shares of action camera maker GoPro (NASDQ:GPRO, +7.53%) bounced off an all-time low to notch their first weekly gain in the past three after saying that it is slashing about 270 jobs (roughly 17% of its staff). On a positive note, GoPro also said that it expects to be profitable on an adjusted basis this year and that Q1 looks to be coming in near the high end of guidance of revenue between $190 million and $210 million. Share of GPRO have been under pressure nearly constantly since the company went public in June 2014. Initially running up to almost $100 less than four months subsequent to the IPO, shares began skidding, including hitting a low of $7.14 last week before kicking back up to close the week at $8.57.
The pattern of consolidation in the insurance industry continued with Canadian private equity firm Onex Corp. (TSX:ONEX, +3.99%) agreeing to sell its USI Insurance Services asset private equity firm KKR & Co. (NYSE:KKR) and Canadian pension fund Caisse de dépôt et placement du Québec in a deal worth $4.3 billion, including debt. Valhalla, New York-based USI, a provider of insurance and employee-related products has 140 offices across the U.S.. The company generated $353 million in EBITDA last year and has about $1.8 billion in debt on the books. Onex acquired USI from Goldman Sachs (NYSE:GS, -1.79%) for $2.3 billion.
3M Co. (NYSE:MMM, +0.60%) agreed to pay $2.0 billion in cash to acquire safety device maker Scott Safety from Johnson Controls International (NYSE:JCI, +1.79%). The buyout is centered on personal safety as a core growth component for 3M. In 2016, Scott Safety, who sells a wide array of products from SCUBA gear to gas detectors, generated about $570 million in sales and roughly $155 million in EBITDA. 3M expects the purchase to deduct $0.10 per share from net earnings this year, but add $0.10 in adjusted net earnings.
JC Penney (NYSE:JCP, -5.82%) is looking down new avenues to generate sales and profits, announcing last week that it has partnered with the likes of Samsung and Trane to run pilot programs in about 100 stores to test a new home services component. Penney's will be evaluating six programs, including heating and cooling systems and bathroom remodels, with services varying by location.
MoneyGram (NASDAQ:MGI, +28.77%) rocketed ahead on the chance of a bidding war for the money transfer company. Euronet Worldwide stepped in and offered $15.20 per share for MoneyGram, valuing the company at over $1 billion and exceeding an $880-million offer from earlier this year by Alibaba's (NYSE:BABA, +2.15%) Ant Financial Services, the world's biggest fintech company. Traders have already run MGI stock above the Euronet offer, expecting that Ant is going to dig deeper to bring MoneyGram, the second-largest money transfer provider in the world behind only Western Union (NYSE:WU, +4.61%), under its umbrella.
Saying your considering selling yourself often seems to help your stock appreciate. Last week, such was the case with cloud services company Citrix Systems (NASDAQ:CTXS, +4.01%) and restaurant operator Ruby Tuesday (NYSE:RT, +42.86%). The clear difference between the size of stock movement between the two has to do with the fact that Citrix stock is at a 17-year high and Ruby Tuesday shares were at their lowest since the Great Recession. Citrix has been considering a strategic sale for nearly two years under pressure from activist investor Elliott Management. Ruby Tuesday has for years been faced with sliding sales along with many others in the casual dining industry, as fast casual restaurants continue to chip away at market share.
Billionaire activist investor Bill Ackman and his Pershing Square Capital Management finally exited their position in embattled drugmaker Valeant Pharmaceuticals (TSX:VRX, -10.46%), licking their wounds with a whopping $3 billion loss. Ackman, who publicly trumpeted his support for the company and belief he could right the ship, originally sunk about $3.2 billion into Valeant, which climbed to about $4.0 billion at its peak before starting to crumple under federal investigations and allegations of cooking the books to fool investors. Shares have lost roughly 95% of their value since the summer of 2015.
High end outdoor apparel maker Canada Goose Holdings (TSX:GOOS) went public, making its listing under "GOOS" on both the U.S. and Canadian markets on Thursday. Shares opened at C$17, above the expected range of C$14-C$16 per share before surging as high at C$23.98. The company sold 20 million shares, coming via 6.3 million from the company and 13.7 million from selling shareholders, to raise C$340 million. The stock pop wasn't the only reason for the company getting attention, as animal rights activists gathered on Wall Street in protest. The group "People for the Ethical Treatment of Animals", better known as PETA, said it was buying shares of the company just to be an activist investor and voice their disapproval of the company's use of goose down and coyote fur.
Weekly Indices Results:
The S&P TSX Composite Index slipped from highs to drop for the third time in four weeks, nipping down by 16.19 points, or 0.10%, to 15,490.49. The TSX-Venture Composite, however, halted a three-week skid, gaining 11.42 points, or 1.43%, to 7810.61.
In the States, the Dow Jones Industrial Average returned to its winning ways after a four-week run ended a week earlier, nudging up 11.64 points, or 0.06%, on the week to 20,914.62. The much-broader S&P 500 rose for the seventh time in eight weeks, moving back towards the 2,400 milestone with a gain of 5.65 points, or 0.24%, at 2,378.25. The tech-rich NASDAQ Composite matched the S&P 500's recent winning record, rising 39.27 points, or 0.67%, to 5,901.00.
Canadian Economic Data: (All data in Canadian dollars and from Statistics Canada unless otherwise noted)
Foreign investment in Canadian securities slowed to $6.2 billion in January, down from $10.2 billion in December. At the same time, Canadian investors increased their holdings of foreign securities by $8.6 billion, led by purchases of U.S. instruments. As a result, international transactions in securities generated a net outflow of funds of $2.4 billion from the Canadian economy in the month, the first outflow since December 2015. Overall, foreign investors acquired Canadian debt securities but sold equities in the month. January marked the first time since August 2015, foreign holders of Canadian shares divested stock (-$1.0 billion), as investors cashed-in on Canadian stock prices climbing higher during the month.
Manufacturing sales rose for the third consecutive month, up 0.6% to $53.8 billion in January. The gain stemmed from a 2.3% increase in non-durable goods sales, led by the petroleum and coal (+7.0% to $5.5 billion), and chemical (+2.5%) to $4.5 billion) industries. Sales were up in 14 of 21 industries, representing 75.4% of the total Canadian manufacturing sector. In constant dollars, sales increased 0.7%, indicating that higher volumes of manufactured goods were sold in January. Sales in current dollars also increased in the fabricated metal product (+2.4%) and the food (+0.7%) industries. Overall sales in the transportation equipment industry declined 2.9% to $10.9 billion, although sales in the motor vehicle industry increased 3.9% to $6.0 billion in January. This gain was not sufficient to offset decreases in the other transportation equipment (-44.7%) and aerospace product and parts (-11.8%) industries. Sales rose in seven provinces in January, led by Ontario (+1.0% to $25.9 billion). Inventory levels rose 1.1% to $70.5 billion in January. Unfilled orders rose 0.3% to $87.7 billion and new orders climbed 4.6% to $54.1 billion, reversing two months of declines for each category.
Home prices just keep on climbing, according to the Canadian Real Estate Association. CREA reported that home sales through its MLS system rose 5.2% from January to February and that the actual (not seasonally adjusted) national average price for homes sold in February was $519,521, up 3.5% from February 2016. When Greater Vancouver and Greater Toronto, the two most active and expensive markets in the country are excluded, the average price drops to $369,728. Prices for two-story single family homes posted the strongest year-over-year gains (+17.9%), followed closely by townhouse/row units (+16%), one-story single family homes (15%) and apartment units (13.7%). Benchmark home prices were up from year-ago levels in 11 of 13 housing markets tracked by the Home Price Index. Sales activity on an actual (not seasonally adjusted) basis was down 2.6% from a year earlier, mostly because of the new regulations implemented late last year to cool the sizzling hot Vancouver market. Nationwide, sales were up in about 70% of local markets. The number of newly listed homes rose 4.8% in February 2017. At the current sales pace, there is still only a 4.2-month supply of homes, the lowest level in nearly a decade.
This week, major economic reports include Wholesale Trade on Monday; Retail Trade on Tuesday; Employment Insurance on Thursday; and the Consumer Price Index on Friday.
U.S. Economic Data:
The Labor Department reported that producer prices rose 0.3% in February, which was higher than the 0.1% increase economists expected. The government's Producer Price Index for Final Demand was up 2.2% from a year earlier, also topping economist expectations for a gain of 2.0% after a 1.6% gain in January. Experts attribute the rise in prices in large part to oil prices finally climbing and steadying around $50. PPI-FD for services rose 0.4%, accounting for more than 80% of the headline gain. As time moves on, the effect of stubbornly low prices around $40 is factored out of the equation. Energy prices rose 0.7% in February, slowing from a 4.7% surge to start the year. Food prices were up 0.3% last month and healthcare costs rose 0.2%. So-called "core" PPI, which excludes the volatile food and energy segments, increased 0.3% from January and 1.8% from February 2016.
Also on the inflation front, the Commerce Department reported that its Consumer Price Index edged up 0.1% in February, in line with economist predictions. Compared to February 2016, the CPI was up 2.7%, the biggest year-on-year gain since March 2012. Energy costs dropped 1.0% from January, the first decline since July. Food costs were up 0.2% month-over-month, the largest climb since September 2015. Other gainers were shelter costs (+0.3%) and medical expenses (+0.1%). Core CPI, which doesn't include the food and energy categories, rose 0.3% from January and 2.2% from the year earlier month, in line with expectations.
While Americans had to spend more on things due to inflation, they otherwise held the purse strings pretty tightly. The Commerce Department showed that retail sales eked ahead only 0.1% in February after a revised 0.6% surge in January. Economists, who called the tiny gain, said that the sluggishness likely could be the results of delays in tax refund payments underscored by tougher scrutiny of tax credits being claimed. Weighing on sales were large declines in sales from January at electronics and appliance stores (-2.8%) and department stores (-1.1%). Both of these industries have seen sales continuously eroded at the hands of online commerce, with those in the e-commerce business gaining 1.2% from January and a whopping 13.0% from last February. Motor vehicle and parts dealers saw sales slip 0.2% month-over-month. Gas stations felt the pain of sliding gasoline prices, with receipts dropping 0.6% from a month earlier, although compared to a year earlier sales were up a strong 20%.
Unseasonably warm weather helped bolster groundbreaking on homes during February, according to data from the Commerce Department. Housing starts increased 3.0% to a seasonally adjusted annual rate of 1.29 million units, exceeding economist expectations for a 1.26 million unit clip. Compared to February 2016, starts were up 6.2%. Building of single-family homes, which make up the lion's share of the housing market, shot ahead 6.5% to an annual rate of 872,000 homes. Starts were up in all regions but the populous South. Starts for oft-volatile multi-family units, like condos and apartments, dropped 3.7% to a pace of 416,000 units. Compared to the first two months of 2016, housing starts are up 7.5%. It looks like things could slow a bit going forward, though. Housing permits, a guage of future construction, decreased 6.2% to a rate of 1.21 million.
After hitting its highest level in 33 years in February at 43.3, the Federal Reserve Bank of Philadelphia’s monthly index on regional manufacturers pulled back to 32.8 in March, arguably still a strong figure, which topped economist calls for a 33.0 reading. Readings over zero means that the majority of respondents see an increase in business activity. March marked the eighth straight month that the Philly Fed Index has been in positive territory. While most all experts thought that the 33-year high wasn't sustainable, March's data was still optimistic for the manufacturing sector. The prices paid index climbed 11 points to 40.7, the highest since May 2011. the guage of future activity rose to 59.5, its highest since August 2014. The indexes for new orders, employment and shipments all held firm or moved modestly higher.
The Federal Reserve showed that industrial production, a measure of output at the nation's mines, factories and utilities, was flat in February, curtailed because unseasonably warm weather put a damper on utility usage. Economists expected a 0.2% increase. Utility production was down 5.7% as Americans didn't need as much heat as temperatures rose nationwide. Manufacturing output rose for the sixth straight month, as factories cranked out more automobiles, electronics and steel during the month. Mining output increased 2.7% last month as oil and gas drilling picked up. Making up about 12% of the economy, factory output is vital to the U.S. However, the plunge in oil prices and a persistently strong U.S. dollar that makes exports more expensive have kept a thumb on output since mid-2014. Data in recent months is suggesting that the industry is rebounding.
The Labor Department said that initial claims for state unemployment benefits, a proxy for weekly layoffs, dipped by 2,000 to a seasonally adjusted 241,000 during the week ended March 11. Economists predicted the slight drop. The latest report marked the 106th straight that claims have been under 300,000, a level consistent with a healthy jobs market. That's the longest streak since 1970, a time when the labor market was much smaller. The four-week moving average of claims, considered by most as a better gauge of labor trends as it flattens week-to-week volatility, moved up by 750 to 237,250 last week, hovering near the lowest mark since April 1973.
This week, major economic data in the States will include only Initial Jobless Claims on Thursday; and Durable Goods Orders on Friday.
Lexaria Bioscience Corp. (OTCQB:LXRP) (CSE:LXX) said that the formal design phase for studies to be conducted under the master collaborative research agreement between the National Research Council of Canada and Lexaria has commenced. A number of studies have been proposed and are currently being evaluated, with the intention to begin work and produce results over multiple intervals in the coming months. Amongst other things, the studies will be specifically designed to evaluate and determine the best methods for introducing heat; optimal temperatures attained; duration of heat and air exposure; and other criteria for processing lipophilic active agents within foods. Each of cannabinoids (such as THC), vitamins, NSAIDs and nicotine will be studied. Analytical testing including chromatography and physicochemical evaluations shall be undertaken, as required, for thorough analyses. In aggregate, results from these studies will add to the understanding of the physical and biochemical characteristics imparted on molecules that have been subjected to Lexaria's technology, with a view to further demonstrating the power of the technology to prospective commercial partners across the various consumer product sectors the Company is targeting.
Vapir Enterprises Inc., (OTCQB:VAPI) announced that its line of premium vaporizers – including the new Vapir Pen – will be available globally through the e-commerce retail channels of Namaste Technologies Inc., an international distributor of vaporizers and related products. Namaste operates more than two dozen e-commerce retail stores in 20 countries. VaporSeller.com, GreenVapes.com and other Namaste online stores offer a wide range of quality vaporizers, including the Prima, VapiRise, NO2 and Vapir Pen. Namaste sites also will carry accessories for Vapir vaporizers.
Forward Looking Statements
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