Global economic news
Americans more optimistic about economyThe Conference Board Consumer Confidence Index surged to 60.6 in January from 53.3 in December. The index is based on a survey of 5,000 U.S. households. The latest figure exceeded projections of economists, surveyed by Briefing.com, who had estimated the index to increase slightly to 53.5.
New home sales in U.S. reach lowest level in 47 years
Sales of new single-family homes in the United States rose to a 329,000 unit annual pace in December, up from 280,000 in November. Despite the 17.5% increase in sales for the month, the U.S. Department of Commerce estimated that only 321,000 homes were sold for all of 2010, a 14% decrease from 2009 and the lowest number of annual home sales on record dating back to 1963. A homebuyer tax credit in California was one reason for the surge in December sales.
U.S. gas prices continue upward climb
Gasoline prices continued to rise in the United States amid strong global demand for oil and a lack of supply. Gas prices have risen $0.12 per gallon, or 4%, in just the last month, according to AAA, and prices are up 14% over the past year. The nationwide average price for gas is currently $3.12 per gallon, less than a dollar below the record high of $4.11 per gallon set in July 2008. Crude oil prices also continued to climb, currently trading at just under $90 per barrel.
Home prices decline again
U.S. home prices fell 1% in November from October, according to the latest Standard & Poor's/Case-Shiller Home Price Indices of 20 metropolitan markets. Prices reached new lows in a number of U.S. cities, and the overall index fell for the fifth straight month. San Diego was the only market in the 20 included markets that did not drop, posting a slight increase of 0.1%.
Hiring in U.S. companies tops layoffs by most in 12 years
According to a survey released this week by the National Association for Business Economics, the percentage of businesses expecting to add to payrolls in the next six months was 42%, compared with just 7% who expect to lay off workers. The quarterly survey includes the views of 84 economists for private companies and trade groups who are NABE members.
Initial jobless claims rise last week
The U.S. Department of Labor reported that 454,000 Americans filed new jobless claims in the week ended January 22. The latest figure represents an increase of 51,000 claims over the previous week.
World leaders, bankers, and investors gather in Davos
While the mood at this year's World Economic Forum in Davos, Switzerland, was more optimistic than at the past two, it was still mostly reserved. Leaders, bankers, and investors from around the globe met to discuss a range of topics, including mounting fears of inflation worldwide and ways to ease the sovereign debt crisis in the eurozone. For the first time, the BRIC (Brazil, Russia, India, China) nations and other emerging economies had a more significant presence at the summit with a record number of executives representing their countries in attendance.
French consumer confidence drops
French household confidence fell in January for a second month as the number of people actively looking for work increased by 27,100 in December to 2.725 million, the highest level since December 2003. Sentiment declined to 85 in January, from 86 in December, according to the Paris-based National Statistics Office Insee.
German pace of inflation picks up slightly; eurozone inflation concerns mount
The Federal Statistics Office in Wiesbaden reported that the inflation rate in Germany rose to 2% in January, from 1.9% in December, on higher food and energy costs. While the country's inflation rate is the highest since October 2008, economists had projected an increase to 2.2%. European Central Bank President Jean-Claude Trichet cautioned that inflationary pressures in the eurozone must be monitored closely. He urged central bankers to help ensure that higher energy and food prices do not disrupt recent gains in the global economy. The ECB did raise the possibility that it may raise interest rates in the future.
S&P downgrades Japan credit rating for first time in nine years
Standard & Poor's lowered Japan's long-term sovereign credit rating by one notch to "AA-" from "AA." The surprise downgrade, the first for Japan since April 2002, puts its debt on the same level as China's. S&P cited the country's tremendous debt burden, exacerbated by persistent deflation and demographic pressures, as reasons for the rating cut.
Hungary raises interest rate
The National Bank of Hungary's Monetary Policy Council raised its policy rate by 0.25%, to 6.00% from 5.75%. It is expected that the central bank's third increase in the past three months will deepen the rift between the bank, which is trying to keep inflation in check, and the government, whose primary goal is to revive the country's economy.
Global corporate news
Earnings season in full swingJohnson & Johnson reported a 12% drop in profit and a disappointing outlook amid decreased spending in health care markets and product recalls. For the fourth quarter, the maker of products ranging from Band-Aids to drugs and medical devices posted earnings of $1.9 billion, compared with $2.2 billion a year earlier. The latest quarter included expenses related to litigation settlements, product liability costs, and last year's recall of hip-replacement products.
Halliburton posted a fourth-quarter profit of $605 million, up from $243 million a year earlier, as the oil field services company continued to benefit from a resurgence of drilling in North America. In addition to more than doubling its profit, the company's revenue jumped 83% from a year earlier.
McDonald's fourth-quarter earnings were in line with analysts' estimates, increasing to $1.24 billion from $1.22 billion a year earlier. Revenue for the fast-food giant increased 4% to $6.21 billion as global same-store sales rose 5%.
Microsoft reported a profit of $6.63 billion for its fiscal second quarter, down slightly from $6.66 billion a year ago. The latest figures showed an increase on a per-share basis, rising from $0.74 per share to $0.77 per share. Overall, the software maker's latest earnings topped analysts' estimates.
AT&T recorded revenue that missed Wall Street projections as the mobile operator added fewer wireless subscribers than expected in its fiscal fourth quarter. The company also said its profit fell to $1.09 billion for the quarter from $2.7 billion a year earlier.
Other corporate news
Google is planning its biggest hiring year yet in 2011. The company expects to surpass its 2007 hiring record, when the company added more than 6,000 employees to its ranks, and last year when 4,500 people were hired. A company source cited tremendous growth in Google's Android mobile operating system, Chrome browser, and the Google Apps platform as leading reasons for the company's continued growth and expected hiring binge.
French drugmaker Sanofi-Aventis extended its $18.5 billion offer for Genzyme for a second time. The $69 per share offer now lasts until February 15, at midnight. The terms of the bid remained unchanged and discussions between the two companies are ongoing.
The week ahead
- Chicago Purchasing Managers Index released Monday, January 31
- Unisys earnings due Tuesday, February 1
- France Producer Price Index released Tuesday, February 1
- U.S. construction spending figures released Tuesday, February 1
- Ameriprise Financial earnings due Wednesday, February 2
- China merchandise trade balance figures and monetary policy assessment released Thursday, February 3
- ISM Non-Manufacturing Index released Thursday, February 3
- Italy Consumer Price Index released Friday, February 4
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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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.
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.
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