Week in Review: Global stock markets tumble amid worries that recovery is in question

U.S. economic news

Inflation hits 44-year low
In April, U.S. inflation slid to its lowest level in 44 years. This is the latest sign that high unemployment and excess production capacity are holding down wages and prices.

Senate approves financial overhaul
The U.S. Senate approved a sweeping overhaul of the financial services sector that would restrict the actions of banks and other financial firms. The measure must now be reconciled with the bill passed by the House of Representatives.

Weak data drive stocks lower
On Thursday stocks were dragged lower by news that U.S. jobless claims had unexpectedly increased 25,000 to 471,000 in the week ended May 15, exceeding expectations and the highest level in a month. A drop in the Conference Board's index of leading indicators added to the selloff. That index fell 0.1% after a sharp decline in building permits.

U.S. and global corporate news

Wal-Mart, Home Depot post results
Wal-Mart reported its fourth consecutive quarter of sluggish U.S. sales but still managed to post a 10% profit increase for the quarter ended April 30 amid tighter expense controls and strong international sales.

Home Depot's fiscal first-quarter earnings rose a more-than-expected 41% as improved profitability and strength in products tied to simple repairs and the outdoors helped results. The company boosted its current-year sales and earnings forecasts.

Global economic news

Germany approves share of bailout
The German lower house of parliament approved the country’s share of a $1 trillion lending package to ease Europe’s debt woes.

UK posts largest budget deficit on record
In April, the United Kingdom posted its largest monthly budget deficit since recordkeeping began in 1993. The report opens the way for what economists say will be some of the sharpest cuts in public spending in a generation. The newly appointed Chancellor of the Exchequer, George Osborne, has ordered departments to find 6 billion pounds of savings this year.

France calls for tougher rules on deficits; Japan's economy grows 1.2%
France joined Germany in calling for tougher rules to prevent large government deficits and said it would work together on measures to stabilize the eurozone.
Japan's economy grew 1.2% in the first quarter, but a sustained and full recovery still depends on continued demand for the country's exports.


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.

--see disclaimer below--

U.S. economic news

Data keep focus on U.S. recovery
The number of Americans filing claims for jobless benefits dropped for the fourth week in a row as the economy expanded and employers retain more workers. Claims fell by a more-than-expected 4,000, to 444,000, for the week ended May 8.

The U.S. trade gap widened 2.5% to $40 billion in March from February. The deficit hit its highest level since December 2008 as both imports and exports surged. Also during March, exports rose 3.2% to a seasonally adjusted $147.9 billion, while imports increased 3.1% to $188.3 billion.

Retail sales rose 0.4% in April, but economists say some of the demand may have been driven by the government homebuyers' tax credit, that expired at the end of April.

U.S. global and corporate news

Senate votes to curb rating agency independence
The U.S. Senate voted to establish a government-appointed panel to decide who should rate individual asset-backed securities. Al Franken, a Democratic senator from Minnesota, proposed the amendment to the financial regulation bill. The amendment was approved by a 64 to 35 vote as some Republicans backed the move.


Technology stocks rally
Cisco posted a 63% jump in quarterly profit. The earnings report sparked a rally among tech stocks amid evidence that a rebound in corporate technology spending is gaining momentum. International Business Machines issued an upbeat profit forecast for the coming years, and European software giant SAP announced plans to buy Sybase. Intel said sales of chips would double over the next few years.

Disney's profit rose 55% on fewer restructuring charges and ticket sales of Alice in Wonderland, which has grossed $962 million world-wide. The outlook for the company's theme park business remained weak.

Toyota announced a surprise fiscal fourth-quarter profit and forecast a 48% earnings increase for the current fiscal year as it attempts to boost sales in Asia and cut costs. The gains come as a surprise after the company posted a net loss in the same period a year earlier. The forecast is seen as a sign that Toyota's recall of more than 8.5 million vehicles is not likely to stunt its recovery.

Global economic news

Europe unveils aid package as Spain and Portugal pledge austerity
On Sunday the European Union unveiled an almost $1 trillion financial-aid package, including a plan to buy government and private debt, after downgrades of Greece, Spain, and Portugal made investors wary of investing in the region.

Days after the announcement of the bailout package Spain and Portugal announced new austerity measures to shore up investor confidence and avoid a Greek-style crisis.

The eurozone economy expanded 0.8% in the first quarter. This is the third quarter of post-recession expansion. While growth in the region still trails that of the United States, it is significant that the debt crisis gripping the eurozone has not stalled its growth.

Greek unemployment rose to 12.1% in February, from 11.3% in January. Economists in the country now worry that the new austerity measures will drive the rate even higher than forecast. The International Monetary Fund said it expects unemployment to climb to 14.6% this year before peaking at 14.8% in 2012. The European Commission has predicted that Greek unemployment will rise to 11.8% this year, from 9.5% in 2009.

U.K. Conservatives and Liberal Democrats form coalition government
After last week's inconclusive election results in the United Kingdom, Conservatives, led by David Cameron, and Liberal Democrats, under Nick Clegg, forged the country's first coalition government in 65 years. Under the coalition Cameron will be Prime Minster and Clegg the Deputy Prime Minister. Cameron's cabinet met for the first time and articulated the need for immediate action to cut Britain's record fiscal deficit. Conservative George Osborne, named Chancellor of the Exchequer, affirmed that he will move toward fast and lasting structural reform. The cabinet agreed that ministers will be paid 5% less than they were in Gordon Brown's government and that ministerial pay will be frozen for the duration of this Parliament. That will save about 3 million over the five-year term.

China's stocks fall into bear territory
China's Shanghai Composite Index fell into "bear" territory this week amid concern that the country's overheated economy may lead to property bubbles, an excessive tightening of monetary policy, and a damaging economic slowdown.

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.

--see disclaimer below--