Week in Review: Stocks rally after Fed announces it will pump $600 billion into U.S. economy

U.S. economic news

Fed details more quantitative easing plans
On Wednesday, the Fed announced that it would purchase an additional $600 billion of longer-term Treasury securities by June in a second round of quantitative easing. The central bank said it would also keep reinvesting principal payments from its securities holdings. Demand for Treasuries jumped on the news and pushed the yield of the two-year and five-year notes down to record lows.


Employment rises more than expected
Employment rose more than expected in October, bolstering optimism about the economic recovery. Payrolls climbed by 151,000 jobs, and the jobless rate held at 9.6%. The report also showed gains in hours worked and earnings. Average hourly earnings increased 1.7% in October from the same month last year. The numbers brought increased optimism that improvement in the labor market will boost household spending.


Data show uneven recovery
Other economic news from October continued to point to an uneven recovery. The Institute for Supply Management reported that manufacturing and service sector activity picked up. U.S. productivity exceeded expectations and rose at a 1.9% annual rate in the third quarter. U.S. retailers posted mixed results, with luxury apparel faring well.

U.S. and global corporate news

EPS top estimates at 77% of companies
Earnings per share have topped estimates at about 77% of the companies in the Standard & Poor's 500 Stock Index reporting since October 7, according to data compiled by Bloomberg. Net income has increased 32% for the group amid 9.8% growth in sales.


BNP posts 46% profit increase
BNP Paribas reported a 46% increase in third-quarter profits amid strong growth in its consumer banking networks.


American International Group posted a $2.4 billion net loss for the third quarter because of various restructuring charges totaling $4.5 billion. Its main insurance business, however, improved from a year ago.


Toyota Motor posted a lower-than-expected increase in fiscal second-quarter profit but raised its full-year outlook as operating income gains in Asia offset continued losses in Europe and Japan. Nissan Motor and
Honda Motor also raised their full-year earnings forecasts this week but warned that the yen's rapid rise against other currencies was an ongoing risk to the bottom line.

Global economic news

ECB, BOE, BOJ hold rates steady
The European Central Bank kept interest rates at a record low of 1% for the nineteenth month, and the Bank of England left its key rate at 0.5% and maintained its asset purchase program at £200 billion. The Bank of Japan kept interest rates at ultra low levels and finalized its plan to buy exchange-traded funds and real estate investment trusts in a ¥5 trillion asset program that it first announced last month.


Australia and India increase rates
Central banks in Australia and India raised rates to stem inflation pressures. China also signaled that an increase may be imminent.

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 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 of mfs.com.

Past performance is no guarantee of future results.

Standard & Poor's 500 Stock Index measures the broad U.S. stock market. It is not possible to invest directly in an index.


Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com

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