Market Week: For Week Ending 9-3

The Markets

So far, so good: September opened with a powerful rally on Wednesday that sent domestic equities up roughly 3%, and Friday's sequel wasn't bad either. The S&P rose above 1,100 once again--it has now recaptured just over 40% of what it's lost since its 2010 high on April 23--and the Dow and Russell 2000 once again turned positive for the year.

Market/Index	2009 Close	Prior Week	As of 9/3	Week Change	YTD Change
DJIA	10428.05	10150.65	10447.93	2.93%	.19%
NASDAQ	2269.15	2153.63	2233.75	3.72%	-1.56%
S&P 500	1115.10	1064.59	1104.51	3.75%	-.95%
Russell 2000	625.39	616.76	643.36	4.31%	2.87%
Global Dow	1984.48	1793.44	1860.16	3.72%	-6.26%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	2.66%	2.72%	6 bps	-113 bps

Last Week's Headlines

• Continued unwinding of temporary census jobs helped push unemployment up slightly in July, to 9.6%, according to the Bureau of Labor Statistics. However, nonfarm payrolls declined less than expected and a separate survey of corporate payrolls showed a gain of 67,000 jobs.
• The Bureau of Economic Analysis said Americans' incomes were up 0.2% in July from the month before as companies continued to increase hours for existing workers rather than hire new ones.
• U.S. manufacturing expanded in August, according to the Institute for Supply Management (ISM), rising from 55.5 to 56.3 (any number over 50 indicates growth). The U.S. services sector also expanded in August for the eighth month in a row, the ISM said. However, the rate of growth was almost 3 percentage points lower than in July, and new orders dropped even more.
• Pending home sales rebounded in July after a sharp drop following the April deadline for qualifying for the federal tax credit. According to the National Association of Realtors®, the index rose 5.2% to 79.4, compared to the 2.8% decline of the previous month.
• High levels of cash held by many corporations are helping to spur mergers and acquisitions. HP won a bidding war with Dell over computer storage company 3Par, and Burger King agreed to be acquired by private equity company 3G Capital.

Eye on the Week Ahead

In a trading week that's both short and light on data, weekly initial unemployment claims data could receive extra attention in light of last week's August figures. The Federal Reserve's "beige book" report will provide anecdotal evidence of the state of the economy.
Key data releases: Fed "beige book" report, consumer credit (9/8); international trade (9/9).
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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U.S. economic news

Job losses moderate
Job losses continued to rise in August but at a more modest pace than expected. Nonfarm payrolls fell by 54,000 last month, matching the level of losses recorded in July. Private employers added 42,000 jobs in August, while a reduction in census workers dragged total payrolls down by 100,000 and pushed the unemployment rate up to 9.6%. Earlier in the week, reports showed that initial jobless claims fell by 6,000; that level indicates that the labor market has not improved this year even as the economy expanded.

Manufacturing gains add to enthusiasm
The Institute for Supply Management said its manufacturing index rose to 56.3 in August from 55.5 the prior month. Faster growth in production, employment, and inventories pushed the U.S. manufacturing index higher last month.

Unexpected jump in pending home sales
Pending home sales unexpectedly grew 5.2% in July. The jump was seen as a sign that the market may be starting to stabilize after the expiration of a homebuyer tax credit.

U.S. and global corporate news

Canadian banks miss expectations
The Bank of Nova Scotia's third-quarter earnings rose 14% as the internationally diverse bank posted a record quarter in its domestic banking business. Still, its results missed analysts' expectations. Toronto-Dominion Bank also missed analysts' expectations, despite a 29% jump in profit. That increase was powered by strong retail results in Canada and the United States and lower loan-loss provisions.

Heinz profits rise 13%
H.J. Heinz's fiscal first-quarter earnings rose 13%, helped by strong sales of ketchup and staples such as Classico pasta sauces. During a conference call to announce its results, the Pittsburgh-based company again signaled its interest in making acquisitions in emerging markets.

Global economic news

ECB extends emergency lending measures
European Central Bank President Jean-Claude Trichet extended emergency lending measures for banks into 2011 as the risk of a renewed U.S. recession put the eurozone's rebound in crisis. The ECB said it will keep offering banks unlimited one-week and one-month loans at least until January 18. The ECB will also offer banks three-month loans in October, November, and December at interest rates linked to the ECB's average benchmark rate over the maturity of the loan.

Japan expands lending program and announces $10.8 billion stimulus
In an effort to combat the rising yen, which analysts have blamed for slower export growth and a sputtering economy, the Bank of Japan announced that it would expand its lending program and that the government would implement a $10.8 billion stimulus package.

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 information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on mfs.com.

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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