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Last Week's Headlines
Eye on the Week AheadInvestors will continue to assess the potential global economic aftershocks of the Japanese earthquake. Tuesday's Fed statement will be watched for hints of any change in future bond-buying plans, while inflation numbers also will be of interest. Key dates and data releases: import/export prices, international capital flows, Federal Reserve Open Market Committee announcement (3/15); housing starts, wholesale inflation (3/16); consumer inflation, industrial production (3/17); quadruple witching options expiration (3/18). 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. Equities data reflect price change, not total return. 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-- |
Monday, March 14, 2011
Sunday, March 13, 2011
Week in Review: Markets tumble on debt downgrades, trade deficits, oil worries, earthquake, tsunami
Global economic news
Greece, Spain see debt downgradedMoody’s Investors Service downgraded the sovereign debt rating of Spain and Greece this week. On Monday, Moody’s cut Greece’s credit rating by three levels, to "B1" with a negative outlook, from "Ba1." On Thursday, Moody’s cut its rating for Spanish sovereign debt to "Aa2" with a negative outlook, from "Aa1." The news reignited fears that countries with high deficits might bring the eurozone into a new debt crisis.
Data show higher gas prices weigh on consumersThe Reuters/University of Michigan consumer sentiment index fell to its lowest level since October as recent turmoil in Libya left consumers more pessimistic about their current and future economic situation. The report also showed a rise in inflation expectations in line with the surge in gas prices. The rise in gas prices also seemed to chip away at retail sales in the month of February. While sales climbed at the fastest rate in four months, the increase was still smaller than expected.
U.S. trade deficit widensThe U.S. trade deficit widened to its highest level in seven months in January despite a record-high level of exports, as surging oil prices added significantly to the price of imports. The U.S. trade deficit jumped 15% to $46.34 billion in January from $40.26 billion in December, the U.S. Department of Commerce reported. The deficit came in much higher than the $41.5 billion shortfall that had been estimated by economists surveyed by Dow Jones Newswires. Higher prices for oil contributed to the growing trade gap along with strong consumer demand.
Trade balances affected by high oil, commodities pricesChina and Germany surprised the financial world with unexpectedly weak trade reports this week.
China has largest trade deficit in seven yearsChina’s $7.3 billion February trade deficit, its largest monthly deficit in seven years, resulted from a 2.4% increase in exports from a year earlier and a 19.4% rise in imports for the same period. Higher prices for commodities played a key role, with the average price for China’s iron ore imports rising 63%. Oil and soybean costs also rose.
Germany’s trade surplus shrinksGermany’s current account surplus fell to €7.2 billion in January from €19.3 billion in December. From January 2010, exports rose 24.2% and imports were up 24.1%.
Japan reports monthly trade deficitJapan incurred its first monthly trade deficit in two years as its exports rose 2.9% in January while imports grew by 15.6%. Imports of petroleum products rose 38.6%, as the price of crude oil was 18.2% higher than the previous year.
Consumer prices rise in China, GermanyChina’s consumer prices rose 4.9% in February from a year earlier, exceeding the government’s 4% inflation target for a fifth month. In Germany, consumer price inflation was at its highest in more than two years in February, reaching 2.1% annually. The rising cost of energy was a factor in both instances.
U.S. wholesale inventories and sales riseU.S. wholesale inventories rose by 1.1% in January to a seasonally adjusted $387 billion, the highest level since July 2008, while sales rose by 3.4%. Since January 2010, inventories rose 11.9% while sales were 15.4% higher. These strong numbers reflect increased consumer spending as well as greater confidence among businesses.
Confidence grows among U.S. small companiesU.S. small companies were more confident in February than they have been in three years, according to the National Federation of Independent Business’ optimism index, which rose to its highest level since the recession began in December 2007.
Consumer debt rises overall; credit card debt easesU.S. consumer credit rose in January at an annual rate of 2.5% while credit card debt fell to a six-year low, according to the U.S. Federal Reserve Board. Overall consumer credit reached $2.412 trillion, an increase of $5 billion. Revolving credit, or credit-card debt, fell by $4.2 billion to $795.5 billion, marking the twenty-eighth decline in credit card use in 29 months.
Global corporate news
Sales of luxury goods soarsGerman luxury carmakers Audi and BMW had highly profitable years in 2010, signaling that demand for luxury vehicles recovered after almost stalling in 2009. Audi doubled its annual profits in 2010 and improved its operating profit margin to 9.4% from 5.4%. BMW substantially raised its dividends and had a 19% increase in revenue.
EADS posts major profitEuropean aerospace firm European Aeronautic Defence & Space Co. (EADS) reported a fourth-quarter net profit of €355 million, a big improvement from a loss of €1.05 billion a year earlier. The maker of the Airbus, among other aircraft, benefited from cost savings, increased aircraft deliveries, and improved performance in non-Airbus divisions.
AIG repays $6.9 billion to U.S. TreasuryAmerican International Group (AIG), one of the major recipients of the U.S. government’s Troubled Asset Relief Program (TARP), repaid $6.9 billion, reducing the U.S. Treasury Department’s preferred equity stake in AIG. To date, 70% of the $700 billion the government has disbursed through TARP has been repaid.
Coffee rivals Green Mountain, Starbucks team upGreen Mountain Coffee Roasters has agreed to sell Starbucks coffee and Tazo tea in its Keurig brewing system in the fall. Just two weeks ago, Green Mountain announced a deal to sell coffee from Starbucks' rival Dunkin Donuts. In 2010, Green Mountain sold 2.9 million Keurig cup portion packs, a 75% increase year over year.
AOL announces job cutTo streamline its businesses, AOL has begun laying off 20% of its work force with plans to eliminate 950 jobs in the United States and India. Last year, AOL cut about one-third of its work force.
The week ahead
- Bank of Japan and Reserve Bank of Australia meeting Monday, March 14
- U.S. Federal Reserve Board meeting Tuesday, March 15
- U.S. CPI data released Thursday, March 17
- U.S. Conference Board leading economic indicators report Thursday, March 17
- Fedex and Nike earnings due Thursday, March 17
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.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News;Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
--see disclaimer below--
Global economic news
Greece, Spain see debt downgradedMoody’s Investors Service downgraded the sovereign debt rating of Spain and Greece this week. On Monday, Moody’s cut Greece’s credit rating by three levels, to "B1" with a negative outlook, from "Ba1." On Thursday, Moody’s cut its rating for Spanish sovereign debt to "Aa2" with a negative outlook, from "Aa1." The news reignited fears that countries with high deficits might bring the eurozone into a new debt crisis.Data show higher gas prices weigh on consumersThe Reuters/University of Michigan consumer sentiment index fell to its lowest level since October as recent turmoil in Libya left consumers more pessimistic about their current and future economic situation. The report also showed a rise in inflation expectations in line with the surge in gas prices. The rise in gas prices also seemed to chip away at retail sales in the month of February. While sales climbed at the fastest rate in four months, the increase was still smaller than expected.
U.S. trade deficit widensThe U.S. trade deficit widened to its highest level in seven months in January despite a record-high level of exports, as surging oil prices added significantly to the price of imports. The U.S. trade deficit jumped 15% to $46.34 billion in January from $40.26 billion in December, the U.S. Department of Commerce reported. The deficit came in much higher than the $41.5 billion shortfall that had been estimated by economists surveyed by Dow Jones Newswires. Higher prices for oil contributed to the growing trade gap along with strong consumer demand.
Trade balances affected by high oil, commodities pricesChina and Germany surprised the financial world with unexpectedly weak trade reports this week.
China has largest trade deficit in seven yearsChina’s $7.3 billion February trade deficit, its largest monthly deficit in seven years, resulted from a 2.4% increase in exports from a year earlier and a 19.4% rise in imports for the same period. Higher prices for commodities played a key role, with the average price for China’s iron ore imports rising 63%. Oil and soybean costs also rose.
Germany’s trade surplus shrinksGermany’s current account surplus fell to €7.2 billion in January from €19.3 billion in December. From January 2010, exports rose 24.2% and imports were up 24.1%.
Japan reports monthly trade deficitJapan incurred its first monthly trade deficit in two years as its exports rose 2.9% in January while imports grew by 15.6%. Imports of petroleum products rose 38.6%, as the price of crude oil was 18.2% higher than the previous year.
Consumer prices rise in China, GermanyChina’s consumer prices rose 4.9% in February from a year earlier, exceeding the government’s 4% inflation target for a fifth month. In Germany, consumer price inflation was at its highest in more than two years in February, reaching 2.1% annually. The rising cost of energy was a factor in both instances.
U.S. wholesale inventories and sales riseU.S. wholesale inventories rose by 1.1% in January to a seasonally adjusted $387 billion, the highest level since July 2008, while sales rose by 3.4%. Since January 2010, inventories rose 11.9% while sales were 15.4% higher. These strong numbers reflect increased consumer spending as well as greater confidence among businesses.
Confidence grows among U.S. small companiesU.S. small companies were more confident in February than they have been in three years, according to the National Federation of Independent Business’ optimism index, which rose to its highest level since the recession began in December 2007.
Consumer debt rises overall; credit card debt easesU.S. consumer credit rose in January at an annual rate of 2.5% while credit card debt fell to a six-year low, according to the U.S. Federal Reserve Board. Overall consumer credit reached $2.412 trillion, an increase of $5 billion. Revolving credit, or credit-card debt, fell by $4.2 billion to $795.5 billion, marking the twenty-eighth decline in credit card use in 29 months.
Global corporate news
Sales of luxury goods soarsGerman luxury carmakers Audi and BMW had highly profitable years in 2010, signaling that demand for luxury vehicles recovered after almost stalling in 2009. Audi doubled its annual profits in 2010 and improved its operating profit margin to 9.4% from 5.4%. BMW substantially raised its dividends and had a 19% increase in revenue.
EADS posts major profitEuropean aerospace firm European Aeronautic Defence & Space Co. (EADS) reported a fourth-quarter net profit of €355 million, a big improvement from a loss of €1.05 billion a year earlier. The maker of the Airbus, among other aircraft, benefited from cost savings, increased aircraft deliveries, and improved performance in non-Airbus divisions.
AIG repays $6.9 billion to U.S. TreasuryAmerican International Group (AIG), one of the major recipients of the U.S. government’s Troubled Asset Relief Program (TARP), repaid $6.9 billion, reducing the U.S. Treasury Department’s preferred equity stake in AIG. To date, 70% of the $700 billion the government has disbursed through TARP has been repaid.
Coffee rivals Green Mountain, Starbucks team upGreen Mountain Coffee Roasters has agreed to sell Starbucks coffee and Tazo tea in its Keurig brewing system in the fall. Just two weeks ago, Green Mountain announced a deal to sell coffee from Starbucks' rival Dunkin Donuts. In 2010, Green Mountain sold 2.9 million Keurig cup portion packs, a 75% increase year over year.
AOL announces job cutTo streamline its businesses, AOL has begun laying off 20% of its work force with plans to eliminate 950 jobs in the United States and India. Last year, AOL cut about one-third of its work force.
The week ahead
- Bank of Japan and Reserve Bank of Australia meeting Monday, March 14
- U.S. Federal Reserve Board meeting Tuesday, March 15
- U.S. CPI data released Thursday, March 17
- U.S. Conference Board leading economic indicators report Thursday, March 17
- Fedex and Nike earnings due Thursday, March 17
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.
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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