Week in Review: Stocks complete best first quarter since 1999

Week in Review is being posted on Thursday this week because stock markets in the United States and many other countries are closed for Good Friday. The U.S. bond market closes at noon on Friday. Have a wonderful weekend - Randy

U.S. economic news

Consumer confidence recovers from February’s sharp decline
The Conference Board’s gauge of consumer confidence rose to 52.5 in March from 46.4 in February. The confidence index, which regained about half of the 11 points it had lost in February, has been recovering slowly since reaching a record low of 25.3 in February 2009. While consumers’ outlook on their present situation and expectations for the future both showed improvement, March’s number is still a long way from a reading of 90, which is considered healthy.


Private sector sheds 23,000 jobs last month
ADP Employer Services reported that private-sector employers unexpectedly cut 23,000 jobs in March, compared with a 50,000 gain forecast by economists in a Dow Jones Newswires survey. The ADP report comes two days ahead of the U.S. Department of Labor’s monthly nonfarm payroll data, which is projected to show the largest job growth in three years. The hiring of workers for the 2010 census is expected to boost federal government payrolls, at least temporarily.


Consumer spending rises for fifth month in a row
The U.S. Department of Commerce reported that consumers boosted their spending by 0.3% in February, the fifth-straight monthly gain. The increase, which occurred despite incomes remaining flat for the month, was slightly below the 0.4% recorded in January and the smallest increase since September 2009.


Home prices inch upward
The Standard & Poor’s/Case-Shiller Home Price Indices reflecting home prices in 20 major metropolitan areas increased 0.3% in January from a month earlier. The 20-city index dropped 0.7% in January from a year earlier, while prices in a 10-city subset were flat. The housing report showed that much of the price improvement has been in the nation’s most battered markets where home sales and prices had fallen the most.

U.S. and global corporate news

Washington Mutual filed a Chapter 11 reorganization plan, just two weeks after resolving a $4 billion dispute with JPMorgan Chase and the Federal Deposit Insurance Corporation (FDIC). The plan, which still needs to be approved by a judge, would set up a $7 billion trust fund to pay creditors, including the $4 billion in deposit accounts that JPMorgan had claimed for itself.

Swiss Life Holding AG reported that its full-year net profit decreased 21% to 278 million Swiss francs ($261.7 million USD) in 2009 from 350 million francs ($329.4 million USD) in 2008. The Zurich-based insurer is currently in the middle of a restructuring program and expects to save up to 400 million francs per year beginning in 2012.

Cosco Pacific, a 51%-owned unit of state-controlled shipping giant China Cosco Holdings, reported a net profit of $172.5 million in 2009, down 37% from $274.7 million the previous year. The world’s fifth-largest container-port operator cited a sharp decline in container-handling volume as the global financial crisis hurt international trade.

Global economic news

Turkish economy grows in fourth quarter
Turkey’s gross domestic product unexpectedly grew by 6% in the fourth quarter. Still, analysts cautioned against reading too much into the state of the country’s overall economic health, given that Turkey is experiencing a widening trade gap, continued high unemployment, and increased government spending.


Ireland announces massive aid program for banks
Ireland’s government unveiled an aggressive plan aimed at helping the nation’s banks raise nearly 22 billion euros ($30 billion USD) to meet new capital requirements that are part of a program to resolve the nation’s banking crisis. Finance Minister Brian Lenihan also announced terms for the first pool of transfers of bad loans to the National Asset Management Agency. Bank of Ireland and Allied Irish Bank are both due to report their 2009 earnings this week.

Eurozone jobless rate climbs
The unemployment rate in the 16 countries that make up the eurozone rose to 10% in February, from 9.9% in the previous three months. The rate is the highest since August 1998, according to the European Union statistics agency Eurostat.

End of existing iron ore pricing system may impact steel prices
Some analysts predict that global steel prices will jump by up to one-third in the wake of an agreement between miners and steelmakers on a dramatic change in the pricing system for iron ore. The agreement by Vale of Brazil and Anglo-Austrian BHP Billiton with Japanese and Chinese mills marks the end of the 40-year-old benchmark system of annual contracts and lengthy price negotiations. Other analysts believe, however, that the new pricing system will actually bring contract prices more in line with those in the existing spot and futures market and could even result in lower prices in the coming year.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The views expressed here are those of MFS^®and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product. Individual securities mentioned are for illustrative purposes only and may not be relied upon as investment advice or as an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report.

Past performance is no guarantee of future results.


Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; boston.com.

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Market Week: March 29, 2010

The Markets

Inching upward: Equities markets seemed to digest the passage of the health care reform bill relatively well; they inched upward for the fourth consecutive week, and the Dow hit an 18-month high Wednesday. Bond markets didn't seem quite as sanguine about the level of debt that might be required. Prices for U.S. Treasuries fell as investors demanded higher yields at last week's auctions.

Market/Index	2009 Close	Prior Week	As of 3/26	Week Change	YTD Change
DJIA	10428.05	10741.98	10850.36	1.01%	4.05%
NASDAQ	2269.15	2374.41	2395.13	.87%	5.55%
S&P 500	1115.10	1159.90	1166.59	.58%	4.62%
Russell 2000	625.39	673.89	678.97	.75%	8.57%
Global Dow	1984.48	2001.01	2010.28	.46%	1.30%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.70%	3.86%	16 bps	1 bps

Last Week's Headlines

• Though home resales were 7% above last year's numbers at this time, they still declined 0.6% in February from the previous month. That's the third monthly decline, according to the National Association of Realtors, and suggests that the extended deadline for the homebuyers tax credit (now April 30) has lured few buyers.
• In case you somehow managed to sleep through last week, President Obama signed the hotly debated Patient Protection and Affordable Care Act (aka the health care bill).
• New-home sales also declined in February, according to the Commerce Department. The 2.2% drop put sales 13% below this time last year. It was the lowest annual rate of sales since recordkeeping began in 1963.
• Durable goods orders such as autos and capital equipment rose 0.5% in February, according to the Department of Commerce. It was the third straight month of increases. Excluding aircraft and defense spending, the number was even better, rising 1.1%.
• The final number for Q4 Gross Domestic Product (GDP) was 5.6%--slightly lower than the Bureau of Economic Analysis' previous estimate, but still higher than the previous quarter's 2.2% growth.
• Fitch Ratings downgraded Portuguese government bonds from AA to AA-, fanning fears about the overall quality of Eurozone sovereign debt. However, the European Union agreed to a joint assistance program with the International Monetary Fund to help Greece deal with its sovereign debt burden.
• Concerns about the level of U.S. debt and speculation in interest rate swaps also hit Treasury bonds, which saw relatively weak demand at this week's auctions.

Eye on the Week Ahead

As the quarter comes to an close this week, Friday's unemployment and payroll data will be key. However, the following Monday will be investors' first opportunity to react to the news, since U.S. markets will be closed for Good Friday. Also, the bond market will keep an eye on the end of the Treasury Department's program of purchasing mortgage-backed bonds.

Key data releases: Personal income/spending (3/29); home prices (3/30); manufacturing, construction spending (4/1); unemployment (4/2).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

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The Hiring Incentives to Restore Employment (HIRE) Act

March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act. The Act gives employers a temporary payroll tax exemption for qualifying new hires plus a tax credit for retaining new employees. The Act also temporarily extends increased Internal Revenue Code (IRC) Section 179 expensing limits.

Payroll tax exemption

Employers who hire a qualified new employee after February 3, 2010, will generally be exempt from paying the Social Security (Old Age, Survivors, and Disability Insurance, or "OASDI") portion of the FICA employment tax on wages paid to the individual after March 18, 2010, and before January 1, 2011. To qualify, the new employee must certify that he or she has not been employed for more than 40 hours during the 60-day period ending on his or her date of hire, and the new employee can't be hired to replace another employee (unless the other employee separated voluntarily, or was terminated for cause). Also, the new employee can't be related to the employer. Most employers are eligible--the payroll tax exemption generally applies to any employer other than the federal government, or state and local governments.

For wages paid prior to April 1, 2010, that would otherwise qualify for the payroll tax exemption, the tax benefit comes in the form of a second quarter credit--employers must pay the regular amount of Social Security tax on these wages, but the amount by which an employer's payroll tax would have been reduced is treated as a payment against tax in the second quarter of 2010.

Tax credit for retaining new hires

If an employer hires an individual who qualifies for the payroll tax exemption described above, continues to employ the individual for at least 52 consecutive weeks, and the individual's wages during the last 26 weeks of the 52-week period equal at least 80 percent of his or her wages during the first 26 weeks, the employer will qualify for an additional business tax credit. The credit is calculated individually for each qualifying employee, and is available for each employee in the taxable year in which the employee first satisfies the 52-consecutive-week employment period. The per-employee credit amount is equal to 6.2 percent of the wages paid to the employee during the 52-week period, up to a maximum of $1,000.

IRC Section 179 expensing

The 2009 limits relating to IRC Section 179 expensing are extended for one year, to taxable years beginning in 2010. As in 2009, the maximum amount that a taxpayer may expense is $250,000 of the cost of qualifying property placed in service for the taxable year. This amount is reduced by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $800,000.

--see disclaimer below--