Frances Horodelski

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“Those who promise you a free lunch will invariably eat you for breakfast.” – Michael Bloomberg

Breaking news

BCE (BNN’s ultimate parent through its ownership of Bell Media) announces the purchase of Manitoba Telecom Services (MBT closed Friday at $32.84) for $40 per share cash plus the assumption of debt. The company has also indicated it would be selling off one-third of MBT’s wireless subs to Telus.

Statistics

Some have called the May-October trading opportunity a “free lunch.” The Stock Trader’s Almanac has the history from 1950 through 2015, which shows that the May through October period has shown an up/down experience of 39/27 with an overall return of about 0.4 per cent. November through October has seen 51/15 with an average return of just under +8. During this past year, the market was marginally higher (+0.65%), but with a big gully in the middle. So the winter tends to be better than the summer for stocks. But it is that latter “gully” point that is important. There is a lot of action in the middle of both periods. I’ve found summer swoons and fall stumbles in almost every year I can remember. And if it isn’t mechanical, the selling and buying can be tough. A day or two off can make a difference. Also, according to Bespoke Investment Group, slices and dices the numbers looking at how markets do post a strong or negative first four months of the year – and strength begets strength. But remember, that equity markets are generally higher (some 70 per cent of the time). So pick your fundamental and technical poison, and maybe don’t pay a lot of attention to the turning of the calendar’s page. Having said that, the keeper of the data, Jeffrey Hirsch, editor at the Almanac, will join us this morning to give us the history and set us up with his trading and technical indicators.

Markets

Last week only Norway and Australian equities were higher. This week is starting softly with the Nikkei down the equivalent of 553 Dow points (3.11%) before more Golden Week holidays while other Asian markets also largely closed. The U.S. treasury has added China, Germany and Japan to the currency watch list. European markets are higher with the FTSE closed for the May Day holiday. Insiders remain bearish. The put: Call ratio is low and that is bearish. The short interest continues to drop. Economic activity tepid (final PMI for Germany below preliminary number although still above 50; France dropped to 48). The Halliburton-Baker Hughes merger is dead with BHI getting a $3.5 billion break-fee (about 15% of BHI’s market cap) of which $1.5 billion will be used for a buyback (watch the smaller oil service names for possible M&A activity discussions). Oil is down modestly (US$45.50) while gold is flirting with $1300. Volume in Europe is light and traders are expecting a choppy week (indeed MKM Partners advising to get your hedge on)

Earnings

This week is another big one for U.S. and Canadian earnings. One hundred and twenty-four U.S. companies will report including AIG today, Pfizer tomorrow, Zoetis on Wednesday, Kellogg and Merck on Thursday and Allergan on Friday. So far, combing actual and estimated results, earnings are down some 5.7 per cent versus the first quarter of 2015 and 75 per cent ahead of expectations. One-third of the companies that have reported (104) have provided negative pre-announcements. The worst profit performance came from the energy space (-107 per cent) while consumer discretionary companies (Amazon has a 10 per cent weight in the sector) have seen a more than 20 per cent rise in profits. From Estimize.com the companies to watch this week include Tesla, Whole Foods, Fitbit, Yelp and GoPro.

From the research pile

Genworth MI Canada upgraded to hold from sell at CIBC ($33.50 target); TransCanada highlighted as favourite pipeline stock at BMO (target $59); US dollar weakening is a silver lining for TD’s ROE (CanaccordGenuity raises target on TD to $60); lots of analysis of Valeant’s 10K including concerns regarding product pricing and the ultimate impact on earnings. Inflation still MIA (according to Yardeni Research) while Barron’s weighs in with “The inflation rally is about to deflate” (someone tell gold). The Canadian dollar is thinking about 80 cents again. BMO discusses currency seasonality including this tidbit “the reality is that the C$ has been notably strong in April for decades. If anything, that force is becoming even stronger….the average 2.6 per cent rise in the past 10 Aprils.” MKM Partners said it is time to revisit adding protection “particularly given the degree of risk complacency suggested by recent sluggish options market activity.”

Let’s get going there is lots to share on BNN today, including BCE’s announcement, what’s next for Sarepta, the calendar trade, “knowing what you can’t know” with Fidelity’s David Wolf, what’s going on with beef in Canada, and some financial planning for newlyweds. The economics calendar is relatively thin (until Friday’s jobs) and activity will likely be light due to a variety of holidays. Keep your head up.

And finally, from Kourtney Kardashian: “People on Twitter are so much more kind than people on Instagram. I’m feeling you guys over here.” And some wag replied “Just don’t tweet anything finance related. You have no idea.”

Every morning Business Day Host Frances Horodelski writes a "chase note" to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins (Mobile users click here: http://bit.ly/1L8f2L6).