Week in Review: Greek turmoil shakes global financial markets

U.S. economic news

U.S. economy grows, and inflation remains tame
The U.S. economy grew at a 3.2% pace in the first quarter as consumer spending rose the most in three years, according to a report released today by the U.S. Department of Commerce. He same report showed that the U.S. Federal Reserve Board's preferred measure of inflation climbed at the slowest pace on record. Tame inflation led the Fed this week to keep interest rates unchanged and to reaffirm its intention to keep interest rates near zero for an extended period. The central bank also moderately upgraded its assessment of the economy.

Home prices and mortgage applications fall
Home prices slipped for the fifth straight month in February as many markets remained under pressure from foreclosures and high inventories. Overall, mortgage applications slipped 2.9% last week, while requests to purchase homes rose 7.4%, as a looming deadline for homebuyer tax credits boosted purchased for a fifth time in six weeks. Applications were still down 24% from a year ago, while applications to refinance fell 8.8% amid an increase in mortgage rates.
.Consumer confidence rises
The Conference Board's consumer confidence index rose to 57.9 for April, from 52.3 in March, and increase that brought it to the highest level since September 2008. The index still remains well below pre-recession levels.

U.S. and global corporate news

Moody's downgrades nine Greek banks
On Friday Moody's Investors Service downgraded its ratings on nine Greek banks as the country's debt crisis took its toll on financial institutions. Among the banks downgraded are the National Bank of Greece, Alpha Bank, Emporiki Bank of Greece, EFG Eurobank Ergasias, Piraeus Bank, Agricultural Bank of Greece, General Bank of Greece, Marfin Egnatia Bank, and Attica Bank.
WSJ reports Goldman under criminal investigation
 
The Wall Street Journal, citing people familiar with the probe, reported on Friday that federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group, or its employees, committed securities fraud in connection with the firm's mortgage trading.

Oil companies book profits as oil costs rise
Exxon Mobil posted a smaller-than-expected gain in the first quarter after health care legislation increased costs and U.S. refineries operated at a loss. Corporate expenses rose by $364 million from a year earlier because of higher health-care costs stemming from U.S. reform legislation passed last month. Net income rose 38%. Royal Dutch Shell booked a 57% rise in first-quarter profit amid higher oil prices and an increase in natural gas output. Revenue rose 48%. Occidental Petroleum's first-quarter earnings nearly tripled as the company benefited from stronger prices and cost cutting.

Ford Motor reported a better-than-expected $2.1 billion profit for the first quarter, fueled by the firm's rising U.S. sales and market share.

Hewlett-Packard agreed to buy Palm for about $1 billion in cash. The move will give HP a greater presence in the smartphone market.

Global economic news

Greece agrees to austerity measures in effort to seal aid deal
As the Greek crisis continued to unfold, this week Greece agreed to austerity measures, expected to cut about $30 billion from its budget, as a precondition for financial assistance. The measures will range from a pension overhaul to wage cuts and they come after weeks of negotiations between the IMF and Greece. However, Greek labor unions have vowed to fight the spending cuts. The agreements follows a week of turmoil in which S&P downgraded the debt of Greece, Spain, and Portugal. S&P cut Spain's rating to "AA" and said in a statement that its outlook for the country's debt was negative, suggesting the possibility of future downgrade if Spain cannot resolve its budget problems.

Despite turmoil, Albania vows to proceed with debt offering
With its neighbor to the south embroiled in financial turmoil and investors reeling from emerging market debt, Albania announced that it would push on with its first sales of Eurobonds. Albania, a nation once rated the poorest country in Europe and where remittances from abroard account for about one sixth of the economy, has the same S&P "B+" rating as Belarus, Nigeria, and Senegal. The bond sale will proceed even as emerging market borrowing costs are surging the most they have in a year. That surge has prompted the Czech Republic to delay its planned sale of bonds.

Russia cuts rates
Russia's central bank lowered its benchmark interest rate for the thirteenth time in a year amid an unsteady economic recovery in the country. It cut the rate a quarter of a percentage point to a record low of 8%. The bank has come under political pressure to keep rates low in an effort to boost lending and contain ruble appreciation.

IMF ups expectations for Asia growth
The International Monetary Fund said Thursday it expects Asia's economic growth this year and next to be slightly higher than its recent estimates because of an upward revision in Singapore's forecasts. The IMF, however, urged Asian policymakers to guard against potential bubbles in local asset markets.

Spain's unemployment rate tops 20%
Spain's unemployment rate breached 20% in the first quarter as the economy continued to shed jobs. The country is reeling from the collapse of a decade-long construction boom. The unemployment rate is the highest in the developed world.


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 26, 2010

The Markets

Equities markets may have been knocked down initially by the SEC's charges against Goldman Sachs, but last week's broad rebound was as robust as first-quarter profits for Goldman and other financials that reported earnings last week. Small caps once again took the lead as corporate earnings reports were generally encouraging and good economic news suggested the housing market might be emerging from its coma.

Market/Index	2009 Close	Prior Week	As of 4/23	Week Change	YTD Change
DJIA	10428.05	11018.66	11204.28	1.68%	7.44%
NASDAQ	2269.15	2481.26	2530.15	1.97%	11.5%
S&P 500	1115.10	1192.13	1217.28	2.11%	9.16%
Russell 2000	625.39	714.62	741.92	3.82%	18.63%
Global Dow	1984.48	2052.54	2037.28	-.74%	2.66%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.79%	3.84%	5 bps	-1 bps

Last Week's Headlines

• Though consumer costs remain contained, inflation at the wholesale level jumped 0.7% during March, according to the Bureau of Labor Statistics. That represents a 6% increase from last March--the biggest year-over-year increase since September of 2008. Rising prices hit hardest at the earliest stage of production; crude goods such as agricultural products and iron were up 3.2%.
• With time running out to qualify for the homebuyer tax credit, home resales were up 6.8% in March, and up 16% from a year ago. The National Association of Realtors® said distressed properties represented 35% of sales, and 44% of home buyers were first-timers. Meanwhile, new home sales were up a buoyant 26.9% from February.
• After three months of increases, durable goods orders were down in March, hit by reduced spending on nondefense transportation equipment such as aircraft parts.
• Greece got a double dose of bad news (triple if you count the strike by civil servants protesting budget cuts). The agency responsible for European economic statistics said Greece's budget deficit might be even bigger than previously believed. Moody's immediately downgraded the country's sovereign debt from A2 to A3 and said additional downgrades are likely, making it even more difficult for Greece to attract private investment to avoid default on 8.5 billion euros' worth of principal due May 19. As a result, Athens finally said it would need to tap the line of credit from its eurozone colleagues and the International Monetary Fund.
• As planes took to the skies around the globe once again, the International Air Transport Association estimated the cost of the Icelandic volcano travel chaos at $1.7 billion--and that's just the impact on the airlines.

Eye on the Week Ahead
On tap are more earnings reports, more debate on financial reform, and more congressional inquiries into financial shenanigans. Any change in the Fed's "extended period" language about interest rates would get a lot of attention, and first-quarter gross domestic product (GDP) will give further clues to the state of the economy.

Key data releases: Home prices, consumer confidence (4/27); FOMC announcement (4/28); Q1 GDP estimate, employment costs, consumer sentiment (4/30).


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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