Week in Review: Stocks slide as worries about slowing global growth intensify

U.S. economic news

Fed downgrades assessment of U.S. economic recovery
The Fed said this week that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated." The central bank said it will buy U.S. Treasuries with proceeds from mortgage holdings. It set a $2.05 trillion floor on its holdings of government bonds and housing debt to buoy an economic recovery. The Fed's statement followed a government report last month that showed the recession that started in December 2007 was worse than estimated.


Increase in jobless claims adds to evidence of weakening economy
An unexpected increase in jobless claims this week added to evidence that the economy is weakening. The number of U.S. workers making new claims for jobless benefits climbed last week to the highest level in six months. Initial unemployment claims rose by 2,000 to 484,000 in the week ended August 7, according to the U.S. Department of Labor. Also this week, reports showed personal incomes fell in the United States last year, except in areas with a high concentration of federal government and military jobs.


Retail sales rise less than forecast
Retail sales rose less than forecast in July as a lack of jobs caused consumers to hold back on spending. Sales rose 0.4%, led by autos and gasoline. Economists predicted a 0.5% gain.


Cost of living rises
The cost of living in the United States rose for the first time in four months as the Consumer Price Index increased 0.3%, the most in a year. The gauge, excluding volatile food and energy costs, rose 0.1%.

U.S. and global corporate news

Cisco Systems results fall short of expectations
Cisco Systems' revenue from its latest quarter and its forecast for future revenue fell short of analysts' expectations. Cisco is seen as a bellwether for the technology sector and the drop in the profits of the company was viewed as a sign that consumers' reluctance to spend is starting to affect corporate sales and profits.



Freddie loses; Disney gains
Freddie Mac reported a second-quarter loss of $4.7 billion and asked the United States for $1.8 billion more in aid. Disney posted strong earnings and revenue growth aided by hit movies and an improving economic climate.


Merger and acquisition activity rises
Deal activity rose this week, boosting hopes that U.S companies are ready to put their $1.8 trillion of stockpiled cash to work. The Blackstone Group agreed to buy Dynegy for $4.7 billion, and International Business Machines said it would acquire Unica for about $480 million.

Global economic news

European economy expands more than expected
Europe’s economy expanded more than economists forecast in the second quarter as the fastest growth in Germany in two decades powered the region’s recovery. The eurozone's gross domestic product increased 1% from the first quarter when it rose 0.2%. This is the fastest growth rate that the 16-country region has experienced in four years, and it is the first time eurozone growth has outpaced that of the United States since the second quarter of 2009. Germany's exports surged in June to near prerecession levels.


China pushes currency lower
China pushed its currency sharply lower on Thursday; the move essentially wiped out gains the yuan had made since the Chinese government loosened its peg against the dollar in June. The country's trade surplus rose in July to its highest level in a year and a half.


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.


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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 Ending August 6, 2010

The Markets

Investor optimism that sent domestic equities surging on Monday was dampened but not extinguished by so-so economic news throughout the week. With large caps leading the way, stocks rebounded strongly from Friday's early swoon after a less-than-encouraging unemployment report. The week's action returned the Standard & Poor's 500 and the NASDAQ to positive territory for the year (although just barely), while the Russell 2000 remained roughly where it was two weeks ago.

Market/Index	2009 Close	Prior Week	As of 8/6	Week Change	YTD Change
DJIA	10428.05	10465.94	10653.56	1.79%	2.16%
NASDAQ	2269.15	2254.70	2288.47	1.50%	.85%
S&P 500	1115.10	1101.60	1121.64	1.82%	.59%
Russell 2000	625.39	650.89	650.68	-.03%	4.04%
Global Dow	1984.48	1855.79	1908.24	2.83%	-3.84%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	2.94%	2.86%	-8 bps	-99 bps

Last Week's Headlines

• An increase of 71,000 private-sector jobs in July wasn't enough to overcome the demise of 143,000 temporary census jobs, according to the Bureau of Labor Statistics. As a result, the unemployment rate stubbornly remained at 9.5%. If people considered underemployed are included, that percentage increases to 16.5%.
• July was the twelfth consecutive month of growth for the U.S. manufacturing sector, according to the Institute for Supply Management. However, that growth as well as new orders continued to taper off; it was the third month in a row in which the rate of growth has been slower than the month before.
• American incomes stalled out in June, and what people had they tended to save. According to the Commerce Department, incomes failed to grow for the first time since last July. However, the savings rate hit its highest level in over a year--6.4% of income--while consumer spending flatlined.

Eye on the Week Ahead

In light of one Federal Reserve Board official's recent warning about the potential for an extended period of deflation, the Fed's announcement Tuesday will be closely watched for any hints at possible new quantitative easing measures. So will inflation data at the end of the week, which will have a bearing on any future Fed moves. Retail sales also will be a focus, with overall July sales data and several major retailers' second-quarter earnings reports on tap.

Key data releases: Federal Reserve Board announcement, productivity/labor costs (8/10); international trade (8/11); consumer inflation, retail sales (8/13).

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--

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