Week in Review: U.S. stocks get a boost from solid earnings and economic data

U.S. economic news

Home sales rise; requests for jobless benefits drops
In March, purchases of new homes surged 27%, the most in almost five decades, and sales of previously owned homes rose for the first time in four months, climbing 6.8%, as buyers rushed to qualify for a government tax credit. New applications for jobless benefits fell 24,000, to 456,000 in the week ended April 17. The U.S. Department of Labor said that distortions associated with the Easter holiday contributed to a rise in claims in the two prior weeks. Producer prices rise The Labor Department also reported that producer prices rose 0.7% in March. The increase came on the back of the biggest gain in food prices since 1984.

Durable goods orders drop
Durable goods orders dropped unexpectedly in March, falling 1.3%, after a 67% decline in demand for commercial aircraft. Excluding transportation, orders surged 2.8%, the most since the recession began in December 2007. Durable goods orders are seen as a barometer of capital spending by businesses.

U.S. and global corporate news

Questions about the fraud lawsuit filed against Goldman Sachs overshadowed the company's announcement that its profits soared 91% in the first quarter. The gain was the second-highest quarterly profit in the company's 141-year history and was powered by the strongest net revenue ever in Goldman's fixed-income, currency, and commodities operations.


Morgan Stanley posted a profit in the first quarter thanks to strong bond trading and increased client activity. The investment bank reported a $1.78 billion profit, versus a $177 million loss in the year-ago period.
In the first quarter, Apple's profit surged 90% and revenue rose 49%. The company said the results were driven by the company shipping more than twice as many iPhones as it did a year ago.


Toyota Motor's credit rating was cut by Moody's Investors Service, and Fitch Ratings said it may also downgrade the company as recalls of more than 8 million vehicles hurt profit. The rating was reduced to "Aa2" from "Aa1."


Verizon Communications posted a 29% decline in its first-quarter earnings because of a charge related to the health care bill and because the telecommunications provider had to rely on lower-end customers to keep growth going in its wireless business.

Global economic news

Greece asks for aid after bond yields soar
Greece requested that its financial lifeline be activated this week after bond yields soared to what Prime Minister George Papandreou called unsustainable levels. The high rates have been undermining Greece's efforts to cut a budget deficit of more than four times the European Union limit. The lifeline combines as much as $60 billion in loans for the year. Greek bond yields soared this week after the EU said Greece's budget deficit was worse than previously forecast and Moody's Investor Service cut the country's creditworthiness. Eurostat, the EU's statistics office reported Thursday that Greece's deficit was 13.6% of gross domestic product in 2009 and may be revised to as high as 14.1% because of "uncertainties" about Greek economic data.

IMF urges governments to tax financial institutions
The International Monetary Fund advised the Group of 20 nations to tax the balance sheets, profits, and compensation of financial institutions to reduce the chances of another financial crisis and pay for the costs if one occurs.

U.K. economy weaker than expected
The U.K. economy grew half as much as forecast in the first quarter. Gross domestic product rose 0.2%.


Europe's services and manufacturing industries expand
Europe's services and manufacturing industries expanded more than expected in April as an export-led recovery prompted companies to step up production. A composite index based on a survey of euro-area purchasing managers in both industries rose to 57.3, the highest level since August 2007, from 55.9 in March.


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: April 19, 2010

The Markets

The Dow and S&P 500 finally cranked it up to 11 and 12 respectively--until Friday, when the Securities and Exchange Commission's fraud charges against Goldman Sachs detonated the Wall Street equivalent of the Icelandic volcano. The news helped spook investors already concerned that stocks were overdue for a tumble. The Dow recovered a bit later in the day from a 180-point drop to end the week up, but the S&P fell back below 1200. Renewed risk aversion also hit prices for gold and other commodities but helped buoy Treasury prices.

Market/Index	2009 Close	Prior Week	As of 4/16	Week Change	YTD Change
DJIA	10428.05	10997.35	11018.66	.19%	5.66%
NASDAQ	2269.15	2454.05	2481.26	1.11%	9.35%
S&P 500	1115.10	1194.37	1192.13	-.19%	6.91%
Russell 2000	625.39	702.95	714.62	1.66%	14.27%
Global Dow	1984.48	2054.70	2052.54	-.11%	3.43%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.90%	3.79%	-11 bps	-6 bps

Last Week's Headlines

• It was a good news/bad news week for the financials. Both Bank of America and J.P. Morgan Chase reported strong earnings. However, the SEC filed civil charges alleging that Goldman Sachs committed securities fraud by selling a subprime-mortgage derivative it had structured in April 2007 with the help of a hedge fund that then profited from taking a short position against the security (thereby betting the derivative would fail).
• Increased housing starts in the South pushed March figures up for the third straight month; the starts also were up 20.2% from a year ago. Building permits, an indicator of future construction, were up 7.5% from February, and 34% from March 2009.
• After February's bad weather, shoppers turned out in force in March. Retail sales were up an encouraging 1.6% from the month before, according to the Commerce Department. Though electronics and appliance sales were down, they were still better than in March 2009, and sales of cars, clothing, building materials, and furniture rose. And according to the Federal Reserve, manufacturing output for such big-ticket items as furniture, cars, and appliances also rose 0.9% in March.
• Consumer inflation remained tame in March at an annual rate of 2.3%, according to the Bureau of Labor Statistics. Prices were up only 0.1% for the month; not counting food and energy, they remained the same.
• The National Bureau of Economic Research (NBER) said it's not yet ready to put an end date to the recession.
• In the first three months of 2010, foreclosures were up 7% from the previous quarter and up 16% from a year earlier. The number of real estate owned (REO) properties is at its highest level since January 2005, according to RealtyTrac, which said that number coupled with a 19% monthly jump in March foreclosures may indicate the pace of foreclosures on distressed properties is picking up.
• Despite solid demand for short-term Greek debt at last week's auction, yield spreads on longer-term debt continued to reflect investor anxiety, and Greek leaders asked to meet with the International Monetary Fund.

Eye on the Week Ahead
Public and financial fallout from the Goldman shocker will be interesting to watch, especially as the company is scheduled to announce first-quarter earnings Tuesday. The news also will likely heat up debate on legislation introduced last week in the Senate that would regulate derivatives. Investors will be assessing the financial impact of the volcano-related chaos, and earnings season gets into high gear.

Key data releases: Wholesale inflation, existing home sales (4/22); durable goods orders, new home sales (4/23).

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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