Week in Review: Global stocks climb amid rising optimism

U.S. economic news

Manufacturing activity perks up
Output at U.S. factories, mines, and utilities increased 1.2% in May, adding to a 0.7% gain in April, according to a report from the U.S. Federal Reserve Board. Industrial production had been projected to rise 0.9% in May, based on a Bloomberg News survey of economists. Rising demand from overseas markets has led companies to rebuild inventories and invest in new equipment. U.S. exports have risen in 10 of the past 12 months, according to figures from the U.S. Department of Commerce.


U.S. housing starts slide
Countering the resurgence in manufacturing activity and the implied rebound in business confidence, U.S. housing starts slumped in May. This was not surprising given the expiration of the federal government’s tax credit for first-time home buyers. U.S. housing starts fell 10% to a seasonally adjusted annual level of 593,000 in May. The National Association of Home Builders reported a drop in its confidence index in June, to 17 from 22.


U.S. consumer, producer prices stable
Inflation pressures remained tame in May according to indices that measure consumer and producer prices. In reports released by the U.S. Department of Labor this week, producer prices for finished goods fell a seasonally adjusted 0.3% in May from April, but they were 5.3% higher than a year earlier. Excluding food and energy prices, however, wholesale inflation rose by 0.2% in May. The Consumer Price Index dropped 0.2% in May, but as with producer prices, the underlying consumer prices, excluding volatile energy and food items, rose 0.1%. Consumer prices were 2.0% higher than 12 months earlier on an unadjusted basis.


U.S. jobless claims rise
Initial claims for jobless benefits in the United States rose by 12,000 to 472,000 for the week ended June 12. However, the four-week average, which smoothes volatility in the weekly numbers, fell by 500 to 463,500. The official unemployment rate remains elevated, at 9.7%.

U.S. and global corporate news

BP commits to $20 billion fund, halts dividend
Under pressure from the U.S. government, BP agreed to set aside $20 billion to clean up the massive Gulf of Mexico oil spill and to compensate victims of the environmental disaster. The oil giant also suspended its dividend to shareholders and will sell about $10 billion in assets over the next year to raise cash. In other news, BP’s credit rating was lowered to "A2" by Moody’s, following downgrades by Fitch and Standard & Poor's in recent days.


FedEx sees global recovery
Executives of FedEx said they are observing a broad-based recovery, driven by activity in Asia and not adversely affected by sluggishness in Europe. The leading U.S.-based package delivery firm, which is seen as a bellwether for economic activity, expects rising demand for its services and economic growth of more than 3% in the United States and globally for its fiscal year ending May 2011.

Global economic news

Eurozone inflation picks up
Eurozone consumer price inflation rose 0.1% in May from April and 1.6% from a year earlier, according to Eurostat, the European Union’s statistics office. Although price increases in the region rose to their highest levels in 18 months, they remain below the target of just under 2% set by the European Central Bank. Core inflation, excluding energy, food, alcohol, and tobacco, rose 0.1% on the month and 0.8% on the year.


German economic expectations slide
German economic expectations declined in June in their sharpest drop since the collapse of U.S. investment bank Lehman Brothers in October 2008. The ZEW Indicator of Economic Sentiment for Germany fell to 28.7 points in June from 45.8 points in May. However, the country’s economic outlook remains positive.


U.K. jobless claims drop
The number of people claiming jobless benefits in the United Kingdom fell more than expected in May according to the Office for National Statistics. The total number of recipients of claimant benefits fell 30,900 to 1.48 million in May, and the unemployment rate – the “claimant count rate” – declined by one-tenth of a percentage point.

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--

Market Week: June 14, 2010

The Markets

On Monday, the Dow fell just below the lowest point reached during the May 6 flash crash. However, a strong bounce on Thursday helped give the S&P 500 its best week since early March, and the Dow once again closed above the 10,000 mark, leaving investors to wonder whether the recent downdraft is at an end or only taking a breather.

Market/Index	2009 Close	Prior Week	As of 6/11	Week Change	YTD Change
DJIA	10428.05	9931.97	10211.07	2.81%	-2.08%
NASDAQ	2269.15	2219.17	2243.60	1.10%	-1.13%
S&P 500	1115.10	1064.88	1091.60	2.51%	-2.11%
Russell 2000	625.39	633.97	649.00	2.37%	3.78%
Global Dow	1984.48	1741.90	1766.71	1.42%	-10.97%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.20%	3.24%	4 bps	-61 bps

Last Week's Headlines

• For the first time since last September, shoppers cut back on spending. According to the Commerce Department, U.S. retail sales were down 1.2% in May, though they were still 6.9% higher than a year ago.
• For a change, there was a glimmer of good news out of Europe. The European Central Bank raised slightly its estimate of eurozone growth for the rest of the year to between 0.7%-1.3%. However, though it still expects growth to pick up in 2011, the bank's current 0.2%-2.2% estimate was lower than its March forecast.
• Though credit card balances were down 12% in April, consumers borrowed an additional $1 billion. Auto, student, and personal loans were up, according to the Federal Reserve Board.
• The Commerce Department said the U.S. trade deficit rose slightly in April to $40.3 billion as exports fell and higher oil prices pushed up the cost of imports.
• Consumer sentiment rose to its highest level in more than two years. The University of Michigan/Reuters June index hit 75.5, up from its 73.6 reading in late May.

Eye on the Week Ahead

With earnings announcements largely at an end, there's little on the horizon to distract from economic data that will be dominated by housing and inflation. The simultaneous quarterly expiration of stock options, stock futures, stock index options, and stock index futures could bring volatility.

Key data releases: Treasury international capital flows, housing market index (6/15); housing starts, wholesale inflation, industrial production (6/16); consumer inflation (6/17); quadruple witching expiration (6/19).

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.

--see disclaimer below--

Week in Review: Volatility ensues as investors watch data and European debt response

U.S. economic news

Bernanke's assurances boost stocks
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average both got a boost midweek when U.S. Federal Reserve Board Chairman Ben S. Bernanke said the Fed would act as needed to support the economic recovery.


U.S. consumer confidence at highest level in two years
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased in June to its highest level in more than two years. Gauges reflecting consumers' perceptions of current financial conditions and their expectations for the next six months both rose. The two gauges are used to project future consumer spending.


Retail sales fall; trade deficit widens
Sales at U.S. retailers fell unexpectedly in May as purchases declined 1.2% after rising 0.6% in April. The drop was the largest since September 2009. Demand fell especially hard at building materials stores — a reflection of the end of the government appliance rebate. Also because of a drop in demand, the U.S. trade deficit widened in April to the highest level in more than a year as exports and imports both declined. The gap grew 0.6% to $40.3 billion.

U.S. and global corporate news

British government voices support for BP
The British government made its first public show of support for BP on Thursday when U.K. Chancellor of the Exchequer George Osborne cited the economic value the company brings to the people of the United States and United Kingdom. The comments came as the Obama administration stepped up the pressure on BP over its handling of the Gulf of Mexico oil spill. The estimated cost to date of the oil spill as a whole has risen to $1.43 billion.

Concern that BP would cut its dividend contributed to heavy selling of the stock Wednesday and Thursday. That selling sent the company's shares to 13-year lows. The cost of insuring BP's debt, as measured by the trade of credit default swaps, rose to levels typically charged for bonds near junk status.


FBI investigates iPad security breach
The Federal Bureau of Investigation opened an investigation into a security breach of AT&T's Web site. On Wednesday AT&T acknowledged that a flaw in its site allowed iPad users' e-mail addresses to be seen.

Global economic news

ECB extends credit to banks, keeps rates unchanged
The European Central Bank announced that it will give banks unlimited funds at a fixed rate in July, August, and September and keep buying bonds as it seeks to ease tensions in money markets and stop the euro region from breaking apart. Meanwhile the bank kept its main policy rate unchanged at 1% and raised its euro region growth forecast for 2010 to 1%, up from its previous 0.8% forecast. Still, it lowered its growth projection for 2011 down from 1.5% to 1.2% because of weaker domestic demand. The ECB also raised its inflation forecast. It now expects consumer prices to rise 1.5% in 2010 and 1.6% in 2011.


BOE keeps rates unchanged
The Bank of England kept interest rates unchanged at a record low of 0.5% in an effort to aid the economy as new Prime Minister David Cameron prepared the biggest budget cuts since the early 1980s. The bank also kept its stock of quantitative easing bond purchases at 200 billion.


New Zealand raises rates
The Reserve Bank of New Zealand raised its official cash rate a quarter of a percentage point to 2.75%. It was the first move in more than a year by the central bank after it slashed its rate 575 basis points between July 2008 and April 2009. The decision came amid an improved domestic outlook and follows a similar move last week by the Bank of Canada and a series of increases by the Reserve Bank of Australia.


China's exports jump most in six years; data show strong recovery
China's exports gained 48.5% in May from a year earlier, the biggest jump in six years. Other reports showed retail sales gained 18.7% and industrial production jumped 16.5%.


Japan's economy expands more than expected
Japan’s economy expanded more than initially estimated in the first quarter, driven by exports and an upward revision to consumer spending. Gross domestic product rose at an annualized 5% rate in the three months ended March 31. That gain is the largest since the second quarter of 2009.

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--