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Sunday, November 4, 2012
Schnack Financial Newsletter for November
Tuesday, October 23, 2012
New Client Alert Explains IRA and Retirement Plan Limits for 2013 - October 22, 2012
IRA contribution limits
The maximum amount you can contribute to a traditional IRA or Roth IRA in 2013 increases to $5,500 (or 100% of your earned income, if less), up from $5,000 in 2012. The maximum catch-up contribution for those age 50 or older remains at $1,000. (You can contribute to both a traditional and Roth IRA in 2013, but your total contributions can't exceed this annual limit.)
Traditional IRA deduction limits for 2013
The income limits for determining the deductibility of traditional IRA contributions have also increased for 2013 (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income ("modified adjusted gross income," or MAGI) is $59,000 or less (up from $58,000 in 2012). If you're married and filing a joint return, you can fully deduct your IRA contribution if your MAGI is $95,000 or less (up from $92,000 in 2012). If you're not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $178,000 or less (up from $173,000 in 2012).
If your 2013 federal income tax filing status is:
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Your IRA deduction is reduced if your MAGI is between:
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Your deduction is eliminated if your MAGI is:
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Single or head of household
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$59,000 and $69,000
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$69,000 or more
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Married filing jointly or qualifying widow(er)*
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$95,000 and $115,000 (combined)
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$115,000 or more (combined)
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Married filing separately
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$0 and $10,000
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$10,000 or more
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*If you're not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $178,000 to $188,000, and eliminated if your MAGI exceeds $188,000.
Roth IRA contribution limits for 2013
The income limits for determining how much you can contribute to a Roth IRA have also increased. If your filing status is single/head of household, you can contribute the full $5,500 to a Roth IRA in 2013 if your MAGI is $112,000 or less (up from $110,000 in 2012). And if you're married and filing a joint return, you can make a full contribution if your MAGI is $178,000 or less (up from $173,000 in 2012). (Again, contributions can't exceed 100% of your earned income.)
If your 2013 federal income tax filing status is:
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Your Roth IRA contribution is reduced if your MAGI is:
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You cannot contribute to a Roth IRA if your MAGI is:
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Single or head of household
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More than $112,000 but less than $127,000
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$127,000 or more
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Married filing jointly or qualifying widow(er)
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More than $178,000 but less than $188,000 (combined)
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$188,000 or more (combined)
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Married filing separately
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More than $0 but less than $10,000
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$10,000 or more
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Employer retirement plans
The maximum amount you can contribute (your "elective deferrals") to a 401(k) plan has increased for 2013. The limit (which also applies to 403(b), 457(b), and SAR-SEP plans, as well as the Federal Thrift Plan) is $17,500 in 2013 (up from $17,000 in 2012). If you're age 50 or older, you can also make catch-up contributions of up to $5,500 to these plans in 2013 (unchanged from 2012). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)
If you participate in more than one retirement plan, your total elective deferrals can't exceed the annual limit ($17,500 in 2013 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan--a total of $35,000 in 2013 (plus any catch-up contributions).
The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan has increased to $12,000 for 2013, up from $11,500 in 2012. The catch-up limit for those age 50 or older remains unchanged at $2,500.
Plan type:
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Annual dollar limit:
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Catch-up limit:
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401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Plan
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$17,500
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$5,500
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SIMPLE plans
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$12,000
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$2,500
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Note: Contributions can't exceed 100% of your income.
The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2013 is $51,000 (up from $50,000 in 2012), plus age-50 catch-up contributions. (This includes both your contributions and your employer's contributions. Special rules apply if your employer sponsors more than one retirement plan.)
Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans has increased to $255,000, up from $250,000 in 2012; and the dollar threshold for determining highly compensated employees remains unchanged at $115,000.
Tuesday, August 14, 2012
WEEK IN REVIEW: PERVASIVE WEAK DATA RAISE HOPES FOR BANK STIMULUS
For the week ended August 10, 2012
- Weak eurozone pulls down German economy
- UK slowdown deepens
- Italian economy contracts for four quarters
- Chinese economy slows
- Freddie Mac profit reflects home price recovery
A number of separate reports confirmed that the European economy continues to weaken, with deepening troughs in Germany, Italy, and the United Kingdom. China reported lower export levels, slowing inflation, and sharply lower bank loan activity. Taiwan and South Korea also had steep declines in exports. The United States stood in contrast, with growing exports.
Despite the rising tide of negative economic data, markets were buoyed by better-than-expected corporate earnings and rising expectations of renewed central bank stimulus efforts to promote growth in the United States, Asia, and Europe.
US and global economic news
Germany falters as economic weakness spreadsEconomic weakness in the eurozone appears to be spreading into Germany, driving the region’s largest and strongest economy into contraction. Germany’s industrial output fell 0.9% in June in adjusted terms, after a 1.7% gain in May. German exports decreased more than expected in June as demand from eurozone trading partners declined. Germany’s factory orders also shrank 1.7% in June, twice as much as had been expected.
UK industrial production falls to 20-year low, BoE cuts forecastsThe UK economy has fallen into a steep slump, according to a number of reports. Industrial production reached its lowest point in 20 years in June, falling 2.5% between May and June, as the industrial sector was hurt by weak domestic demand and slowing exports. UK house prices fell in July, according to figures from Halifax, the country’s home mortgage lender. The United Kingdom posted its largest overall trade deficit in at least 15 years, as weak export demand is hampering efforts by the country to trade itself out of recession. The Bank of England cut its forecasts for growth and inflation, signaling that it might add economic stimulus in the near future.
Italy’s economy marks four quarters of contractionItaly’s economic output shrank in the second quarter, marking an entire year of consecutive quarterly contraction, according to Istat, its official state statistical agency. The country’s gross domestic product shrank 2.5% in the second quarter from a year earlier. Italy’s domestic economy has seen declining retail sales, record low consumer sentiment, and weak bank lending. Istat reported a 1.4% drop in industrial output in June from May and a decline of 8.2% from June 2011.
Evidence mounts of Chinese slowdown Chinese economic reports painted a clearer picture of a slowing economy in China, with new yuan loans by Chinese financial institutions down more than 40% in July from June, exports rising just 1% in July from a year earlier, and inflation slowing to 1.8% in July from a year earlier. The data are particularly worrisome because of how heavily dependent many other countries have become on China as a customer for their goods. Taiwan and South Korea reported sharply lower July exports, down 12% and 8.8%, respectively, from a year earlier.
US economic reports positive overallThe US economy, while not robust, appears to be in better shape than any other major nation’s, as data from elsewhere continue to show softening. The US trade deficit narrowed to its lowest level in two years in June, as exports reached a record high and imports eased largely because of declining oil prices. However, the trade gap with China grew because exports to China declined while imports continued to grow. The US housing market showed signs of a pickup: Three of five banks surveyed this summer by the US Federal Reserve Board said demand increased for home-purchase loans during the past three months; home prices rose by 2.5% in June from a year ago; and 11.9% of mortgage loans were 30 days or longer past due or in foreclosure at the end of June, down from 12.9% a year earlier.
US corn crop forecast down, prices much higherThe size of this year’s US corn crop is forecast to drop by 17%, and prices will rise by up to 39%, according to the US Department of Agriculture. The widespread US drought is expected to have a similar impact on the country’s soybean crop. As a result, food prices are expected to rise, including those of meats and poultry that rely on corn and soybeans for feed. The USDA also predicts that grain exporters and other US businesses that use corn will cut back on their consumption.
US and global corporate news
Freddie Mac profit reflects rising home pricesFreddie Mac, one of two US government-sponsored home mortgage market facilitators, reported a $3 billion second-quarter profit, after a $2.1 billion loss a year earlier. Freddie Mac benefited from rising home prices, which reduced the amount of money it set aside to protect against future credit losses. It also paid a $1.8 billion dividend to the US Treasury Department, which bailed it out in 2008.
HP to take $8 billion charge PC (personal computer) maker Hewlett-Packard said it plans to write down the value of its services segment by about $8 billion, acknowledging that it overpaid for its $13 billion acquisition of Electronic Data Systems in 2008. HP's services business has struggled with profitability amid the global economic downturn.
US Justice Department will not charge Goldman SachsThe US Department of Justice said it would not bring charges of financial fraud against Goldman Sachs or its employees. The decision not to prosecute was announced Thursday, after a year-long investigation could not meet the burden of proof.
Commerzbank posts profit, warns of slowdownGerman bank Commerzbank posted a much higher second-quarter profit than a year ago but warned that its second-half profit would decline because of the challenging economy and declining consumer activity.
Deutsche Telekom dials up higher earningsGermany’s Deutsche Telekom reported sharply higher second-quarter net profit as recent staff reductions led to lower expenses. However, the firm warned of ongoing business challenges, including intense competition, onerous regulations, and difficult economic conditions, particularly in Greece.
News Corp posts large loss on write-downMedia conglomerate News Corp posted a $1.55 billion loss for its fiscal fourth quarter after a multibillion-dollar write-down of its unprofitable publishing businesses. The firm plans to separate its film and television divisions from its publishing arm.
The week ahead
- The European Union releases its flash gross domestic product data for the second quarter on Tuesday, August 14.
- The US Department of Labor reports the July Consumer Price Index on Wednesday, August 15.
- The United Kingdom releases its monthly retail sales report on Thursday, August 16.
- Wal-Mart Stores announces its quarterly earnings on Thursday, August 16.
- The Conference Board releases its leading indicators report on Friday, August 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.
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 or of Schnack Financial Group, Inc. For a complete list of holdings for any MFS portfolio or Schnack Financial Group, Inc., please request the most recent annual, semiannual, or quarterly report. Full MFS 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.
Issued in the United States by MFS Institutional Advisors, Inc. ("MFSI") and MFS Investment Management. Issued in Canada by MFS Institutional Advisors, Inc., and McLean Budden Limited (carrying on business as MFS McLean Budden). No securities commission or similar regulatory authority in Canada has reviewed this communication. Issued in the United Kingdom by MFS International (U.K.) Limited ("MIL UK"), a private limited company registered in England and Wales with the company number 03062718, and authorised and regulated in the conduct of investment business by the UK Financial Services Authority. MIL UK, an indirect subsidiary of MFS, has its registered office at Paternoster House, 65 St Paul’s Churchyard, London, EC4M 8AB and provides products and investment services to institutional investors globally. Issued in Hong Kong by MFS International (Hong Kong) Limited ("MIL HK"), a private limited company licensed and regulated by the Hong Kong Securities and Futures Commission (the "SFC"). MIL HK is a wholly-owned, indirect subsidiary of Massachusetts Financial Services Company, a US based investment adviser and fund sponsor registered with the US Securities and Exchange Commission. MIL HK is approved to engage in dealing in securities and asset management regulated activities and may provide certain investment services to "professional investors" as defined in the Securities and Futures Ordinance ("SFO"). Issued in Latin America by MFS International Ltd. For investors in Australia: MFSI and MIL UK are exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 in respect of the financial services they provide. In Australia and New Zealand: MFSI is regulated by the US Securities & Exchange Commission under US laws and MIL UK is regulated by the UK Financial Services Authority under UK laws, which differ from Australian and New Zealand laws.
--See Disclaimers Below--
Monday, July 9, 2012
July Monthly Newsletter
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Saturday, June 9, 2012
Monday, June 4, 2012
Week in Review: Spain bank woes drive fresh flight to safety
For the week ended June 1, 2012
As the economic situation in Italy and Spain continued to deteriorate, the flight to safety picked up this week. Benchmark borrowing costs in the United States plunged to levels last seen in 1946 and those in Germany and the United Kingdom hit all time lows. German two-year bund yields fell to zero for the first time, while government yields in Italy and Spain hit worrisome levels.
Concern that Spain would not be able to save its troubled banks sparked a broad selloff in global equity markets and the euro. For the week, major stock benchmarks declined 2% to 3%. For the month of May, broad equity indices, including the Dow Jones Industrial Average and Standard & Poor's 300 Stock Index 500, gave back 6% or more after peaking early in May. It was the Dow’s worst month in two years. Crude oil futures fell to seven-month lows — below $83 a barrel — reflecting renewed signs of weakness in the US economy, rising oil stockpiles, and deeper eurozone worries. Oil prices have plunged by close to 25% since their $110-a-barrel peak in February; the price of a gallon of regular gasoline in the United States fell 45 cents to $3.67 per gallon and is expected to drop further.
After May ended with financial markets down substantially for the month, June began with a spate of more bad news from the eurozone, including record-high unemployment, along with disappointing data on Chinese manufacturing activity and US employment, which grew by its smallest monthly margin in a year. The US unemployment rate rose to 8.2%.
US and global economic news
Spanish woes intensify eurozone crisisThe eurozone crisis reached a new level of intensity this week as the Spanish government battled to save the troubled Bankia. Last Friday Spain announced plans to nationalize the bank, which is a real estate lender in need of a €23.5 billion bailout. The European Central Bank this week refused the Spanish government's request to recapitalize Bankia. That refusal has forced the Spanish government to consider an alternative––issuing bonds to the bank, which then would be used as collateral to raise cash from ECB lending facilities. As leaders grappled with a solution, ECB President Mario Draghi urged Europe's political leaders to come up with a longer-term vision for the region. Elsewhere companies and banks seemed to be steeling themselves. Multinational companies focused on retrieving cash from Greece and some of China's biggest banks cut off European counterparts from borrowing and derivatives trading.
Spanish retail sales fell by a record 9.8% in April from a year earlier, the twenty-second consecutive monthly decline. The country’s unemployment rate is at 24.4%. The European Commission said it would recommend extending the timeline for the country to reach targets on its deficit level, recognizing the challenges faced by the region’s fourth-largest economy and the financial strain of having to bail it out.
Weak US jobs data adds to spate of bad newsMonthly US payrolls rose by much less than expected in May, as American employers added 69,000 jobs, far fewer than the 150,000 that had been forecast. The nation’s jobless rate rose to 8.2% from 8.1% in April, while hours worked fell. Private payrolls rose 82,000, half of the projected 164,000 increase. Government payrolls declined by 13,000. April’s jobs increase was revised down to 77,000 from a previously reported 115,000. Initial unemployment insurance claims rose by 10,000 to 383,000 for the week ended May 26. The US economy grew just 1.9% annually in the first quarter, according to the latest update from the US Department of Commerce, which had previously estimated a growth rate of 2.2%. The Conference Board’s consumer confidence index fell to 64.9 in May from 68.7 in April, the third straight month of declines.
Eurozone data show continued regional weaknessUnemployment in the eurozone reached an all-time high of 17.4 million people in April, 1.8 million more than a year earlier, and 110,000 higher than in March. The seasonally adjusted unemployment rate remained at 11%. Manufacturing activity in the 17-nation economic region reached a three-year low, as the final manufacturing purchasing managers’ index fell to 45.1 in May from 45.9 in April. It was the index’s tenth straight month of contraction. Eurozone economic confidence fell to its lowest point since October 2009, according to a report from the European Commission. An index of eurozone executive and consumer sentiment dipped to 90.6 in May from 92.9 in April.
Gap between safe-haven and risky sovereign bonds growsYields on two-year German bunds fell to -0.012% while 10-year bunds yielded 1.123%. In sharp contrast, 10-year Spanish government bond yields climbed to 6.56%. This is viewed as dangerously close to the 7% mark, at which point Spain’s sovereign bonds may be seen as unsustainable, prompting a bailout initiative. Italian 10-year bond yields inched up to just below 6%, also indicative of troubles in the eurozone’s third-largest economy.
Chinese manufacturing activity slows, economic stimulus initiatedTwo measures of Chinese manufacturing activity indicated further slowing in the world’s second-largest economy. The official China purchasing managers index fell to 50.4 from 53.3 in April, while HSBC’s gauge fell to 48.4 in May from 49.3 in April. Various reports indicated that Chinese leaders are quietly beginning to add stimulus to the country’s economy. Since early April, the National Development and Reform Commission has approved major infrastructure projects including clean-energy hydropower stations, four new airports, and the renovations or expansions of three large steel mills.
India’s economy slowsIndia’s economic growth tapered to its slowest pace since 2003 in the first quarter of 2012, with the nation’s gross domestic product growing 5.3% from a year earlier, far slower than its 8% growth rate of recent years. Economists had forecast 6.1% GDP growth.
Japan posts positive dataCapital spending by Japanese companies rose 3.3% in the first quarter, corporate current profits were up 9.3%, and corporate sales were 0.6% higher than a year earlier. Japan’s economy grew an annualized 4.1% in the quarter, based on preliminary GDP data. Much of this activity is a result of government spending to spur recovery from the earthquake and tsunami of March 2011. Domestic Japanese sales of new cars, trucks, and buses rose 66% in May from a year earlier, according to the Japan Automobile Dealers Association.
US and global corporate news
IPO issuers get cold feet after Facebook’s disappointmentWould-be issuers of initial public offerings appear to be waiting for signs of a shift in market conditions before they attempt to go where Facebook ventured and stumbled. London-based jeweler Graff Diamonds, travel-listings website Kayak, and Formula One Group are holding off from going public for now. Graff was a day away from pricing its IPO when it hit the pause button. Kayak has yet to launch its roadshow to pitch its stock to potential investors; it is now taking a break, but its revenue is growing despite the company facing stiff competition in the online travel services space. Formula One was planning to launch a preliminary prospectus for a $2.5 billion IPO with the Monetary Authority of Singapore on June 5.Two more Canadian banks post solid profitsBank of Nova Scotia and Canadian Imperial Bank of Commerce joined three other Canadian banks in posting strong earnings for the latest quarter. Scotiabank’s profit fell almost 10% after benefiting from acquisition-related gains a year ago. Excluding those gains, the bank grew its earnings by 16%. Its adjusted earnings beat expectations. CIBC also beat analyst expectations in posting a 6% increase in earnings.
Research in Motion warns of money-losing quarterCanadian BlackBerry maker Research in Motion warned that it would likely lose money for the second straight quarter. The firm is trying to cut costs and turn its business around before launching the next BlackBerry later this year and has hired external advisers to help management determine how to salvage or sell parts of its business.
Moody’s downgrades Nordic banksMoody’s Investors Service this week downgraded the ratings of nine Danish financial institutions, citing a “weak operating environment, pressurized asset quality, and poor profitability.” Last week, Moody’s lowered its ratings for two Swedish banks and a Norwegian bank. Just as noteworthy is the criticism some of these banks and asset managers have had for Moody’s, and the market response, which has been to ignore the downgrades and send bond and stock prices higher. Among the most severe downgrades was a three-notch downgrade of mortgage lender Nykredit Realkredit A/S and its Nykredit Bank A/S unit.
US automakers post robust sales in MayChrysler Group continued to register rapid sales growth, with a 30% increase in May from a year earlier, while fellow US automakers Ford Motor (a 13% sales increase) General Motors (up 11%) also did well.
The week ahead
- The US Department of Commerce releases its May factory orders report on Monday, June 4.Japan issues its monthly industrial production report on Wednesday, May 30.
- The Institute for Supply Management releases its non-manufacturing report for May on Tuesday, June 5.
- Markit releases the eurozone Services Purchasing Managers' Index for May on Tuesday, June 5.
- The European Union issues its gross domestic product (GDP) data for May on Wednesday, June 6.
- The US Federal Reserve Board releases its Beige Book for May on Wednesday, June 6.
- Japan ues its quarterly GDP report on Thursday, June 7.
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--
Monday, May 21, 2012
Week in Review: Ongoing eurozone uncertainty weighs on global markets
For the week ended May 18, 2012
- Eurozone uncertainty heightened by Greek government crisis
- Italian, Spanish bank debt downgraded
- Japan rebounds while Chinese activity cools
- Facebook IPO raises $16 billion
- Fallout continues from JPMorgan trading loss
Broad stock market indices in Europe, Asia, and North America continued to fall, with many major stock indices down more than 3% for the week. The Dow Jones Industrial Average has declined on 11 of the past 12 trading days. The S&P 500 Index is at a four-month low. About $4 trillion has been lost from global equity markets this month, according to Bloomberg News. The euro hit a four-month low of $1.264 against the US dollar, and the price of a barrel of crude oil dipped below $93.
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US and global economic news
Greek drama unfolds with more uncertainty Uncertainty persisted around Greece’s government this week, as talks to form a coalition collapsed; Greece’s electorate will vote again next month. Critical questions remained, including whether Greece would honor its debt obligations, whether it would follow austerity measures that its electorate has largely repudiated, and whether Greece would leave the eurozone. Greek bank depositors grew nervous and withdrew €700 million (almost $900 million) from local banks Monday. Fitch downgraded its debt to CCC from B- in recognition of heightened risk that the country would not be able to remain in the eurozone.
Italian, Spanish bank debt downgradedMoody’s lowered debt ratings at 26 Italian banks, as government austerity measures have cut demand for loans, and 16 Spanish banks, as bad debts held by Spanish banks rose to a 17-year high. Moody’s cited concerns about the banks' exposure to Spain's critically weak economy and the ability of the Spanish government to support them in a crisis. The Italian bank downgrades note the banks' vulnerability to mounting loan defaults. Italy and Spain have both entered a double-dip recession.
Germany helps eurozone escape recession by a whiskerA strong rebound by Germany helped keep the eurozone from entering a technical recession of two consecutive quarters of contraction. The eurozone gross domestic product for the first quarter this year was unchanged following a 0.3% contraction in the fourth quarter of 2011. Germany’s GDP rose 0.5%, while France’s was unchanged, and Italy and Spain’s economic activity contracted 0.8% and 0.3%, respectively.
US economic reports remain largely upbeatUS housing starts rose more than expected in April, by 2.6% to a seasonally adjusted annual rate of 717,000, the US Department of Commerce reported. The percentage of homeowners delinquent on their mortgages in the first quarter fell to the lowest level since 2008, with 11.8% of all mortgages at least 30 days past due or in foreclosure, down from 12.8% a year ago, and 14.7% two years ago, according to the Mortgage Bankers Association. Industrial production in the United States rose 1.1% in April, the most since December 2010, driven largely by motor vehicle sales. The US rate of consumer inflation was unchanged from March to April after increasing for three months. The consumer price index was up 2.3% in April from a year earlier, its smallest annual increase since February 2011. Core inflation (prices excluding food and energy) also rose 2.3% for the year. Weekly initial jobless claims were unchanged at 370,000 for the week ended May 12, the US Department of Labor reported.
Chinese foreign investment declinesForeign direct investment into China receded for the sixth consecutive month in April. For the first four months of 2012, foreign direct investment in China was 2.38% below the year-earlier period, influenced by the sluggish global economy. China’s central bank announced it would cut the reserve-requirement ratio for banks by 0.5 percentage point. The leaders of China, Japan, and South Korea are planning to begin free-trade negotiations this year and could create the world’s third largest free-trade zone after the North American Free Trade Agreement and the European Union.
Recovering Japanese GDP rises 4.1%Japan’s economy rebounded, growing at an annualized rate of 4.1% in the first quarter, fed by government spending and increased domestic demand. Public investment grew 5.4% for the quarter. Although government spending has supported Japan’s post-tsunami recovery, in contrast to Europe’s austerity measures, it is seen as unsustainable, given that Japan’s sovereign debt is twice the size of its economy, the highest level among industrialized countries.
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US and global corporate news
Much anticipated Facebook IPO raises $16 billionFacebook’s initial public offering sold 421.2 million shares at $38 each, raising $16 billion. Facebook’s IPO is the third largest in the history of the United States, behind those of General Motors and Visa. At a valuation of $104 billion, the social network’s market value is greater than that of McDonald’s, Citigroup, and almost all other well-established American companies. There’s wide divergence of opinion on whether Facebook is overhyped and overvalued or whether its base of 900 million users presents tremendous long-term potential. Facebook has been compared to a mining company sitting on valuable deposits that could take time to dig up and mine.
JPMorgan Chase trading loss leads to increased scrutinyFallout continued after the announcement last week of JPMorgan Chase’s $2 billion-plus derivatives-disaster trading loss, with speculation that it would lead to increasingly stringent financial regulations. JPMorgan CEO Jamie Dimon has been among the most vocal opponents to these regulations. Dimon is scheduled to appear before the Senate Banking Committee sometime in June.
Wal-Mart, Home Depot profits top expectationsThe world’s largest retailer and the nation’s largest home-improvement retailer posted better than expected first-quarter earnings. Wal-Mart’s quarterly net income rose 10% on an 8.5% increase in revenue. Home Depot had a 27% increase in first-quarter earnings, aided by unseasonably warm weather in much of the United States. Sales rose 5.9% and the firm’s gross margin widened slightly.
Japanese banks prosper on heavy bond salesJapan’s three largest banks posted total profits of almost ¥2 trillion, or $25 billion, their best quarterly performance since before the global financial crisis began in 2008. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group’s results were all lifted by substantial gains from sales of Japanese government bonds, something that is likely to decline sharply moving forward, according to the banks’ executives.
Coty withdraws offer for AvonAfter Avon Products took too long to respond, would-be suitor Coty withdrew its offer of $10.7 billion for Avon and said it would explore other opportunities. Avon had rejected an earlier bid from Coty as uncertain and too stingy.
Hewlett-Packard plans job cutsHewlett-Packard is planning to cut its workforce by 25,000 to 30,000 employees, according to The Wall Street Journal. This would reduce its global employees by 8%. H-P has been struggling with declining revenue and profits for a couple of years.
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The week ahead
- US existing home sales data is released on Tuesday, May 22.
- Hewlett-Packard announces its quarterly earnings on Wednesday, May 23.
- The European Union releases flash results for its PMI Manufacturing Index on Thursday, May 24.
- Japan releases its Consumer Price Index data on Thursday, May 24.
- The University of Michigan issues its Consumer Sentiment Index on Friday, May 25.
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.
back to top
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--
Friday, May 4, 2012
May Newsletter
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Schnack Financial Group, Inc
Randy Schnack
President/CEO 227 South Blvd Oak Park, IL 60302-4712 708-386-2790 info@schnackfinancial.com www.SchnackFinancial.com |
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Saturday, January 21, 2012
Week in Review: Markets rise on slightly upbeat earnings and economic news
For the week ended January 20, 2012
- U.S. jobless claims down sharply
- U.S. inflation tame
- China shows signs of slowing growth
- German economic sentiment jumps
- Earnings mixed for major financial and technology firms
Markets were positive overall as talks between the Greek government and the Institute of International Finance continued Friday in an effort to cut a deal that would substantially lower Greece’s debt payments to private-sector creditors. U.S. economic news was modestly encouraging, as jobless numbers fell, U.S. price indices stayed fairly flat, and home sales improved somewhat. The Chinese economy showed signs of slowing, while German economic sentiment rebounded.
A steady stream of corporate earnings reports were mixed. Many reflected the challenges faced by large U.S. banks. Others, including earnings results from U.S. technology giants, were more encouraging. Stocks rose overall globally, and U.S. Treasury yields rose as demand for the safe-haven securities eased, reflecting improved investor sentiment.
U.S. and global economic news
Greek debt deal loomsDiscussions between the Greek government and private sector creditors continued for a third day Friday, ahead of efforts to complete a second rescue package for the troubled country. With a potential bailout in the works for next week, time is critically important. A senior delegation from the International Monetary Fund, European Central Bank, and European Union arrived in Athens Friday to discuss the rescue package. Next Monday, European finance ministers will meet in Brussels to work out their portion of the next Greek bailout, forecast at €130 billion.Weekly U.S. jobless claims drop by 50,000Initial jobless claims fell by 50,000 to a seasonally adjusted 352,000 in the week ending January 21, decreasing the four-week average by 3,500 to 379,000. Both numbers are well below the 400,000 mark, widely viewed as indicative of the U.S. economy adding jobs overall.
U.S. housing market improves slightly, misses expectationsSales of U.S. existing homes rose 5.0% in December from November, the third straight monthly increase, according to the National Association of Realtors. However, the results fell short of a forecast of 5.2% growth. For all of 2011, 1.7% more homes sold than in 2010. Overall, 4.26 million homes were sold last year, down from a peak of more than 7 million in 2005.
Consumer, producer inflation tameReadings on U.S. producer and consumer prices, released by the U.S. Department of Labor, showed little month-to-month change in December. The producer price index fell 0.1% in December from November on lower food and energy costs. However, core prices, stripping of food and energy, rose 0.3%. For the year, producer prices rose 4.8%. The consumer price index was unchanged in December, and increased 3.0% for the year. The core CPI edged up 0.1% for the month and rose 2.2% for all of 2011.
Chinese economy and manufacturing gauge slipChina’s gross domestic product grew 8.9% in the final quarter of 2011 compared with a year earlier, a higher-than-expected growth rate but an indication of a slowdown for the world’s fastest economic engine. On a quarterly basis, China’s GDP growth was 8.2%. A separate report showed that China’s manufacturing purchasing managers index stood at 48.8, just below the threshold of 50 that separates growth from contraction. This was the third straight month of declining manufacturing activity in China.
German economic sentiment index has record riseGermany’s latest ZEW monthly economic sentiment index rose to -21.6 in January from -53.8 in December, the single largest monthly increase since the survey’s inception in 1991. Germany also paid the lowest interest rate ever on two-year Treasury notes Wednesday, 0.17%, as debt downgrades on France and Austria last Friday made German debt more appealing.
Germany cuts growth forecastThe German government cut its economic forecast for 2012 for the second time in recent months. Currently, Germany expects its economy to grow 0.7%, down from 1.0% in October, which was a reduction from its original 1.8% projection for the year.
U.S. and global corporate news
Kodak files for bankruptcyFollowing through on its rumored move, Eastman Kodak filed for bankruptcy protection after running short of cash. The photography icon has secured close to $1 billion in financing from Citigroup to help keep it in business through its bankruptcy proceedings. Kodak is hoping to improve liquidity, sell some of its patent portfolio, and shed some legacy liabilities, including pension and health care obligations.Goldman-Sachs reported a 58% drop in fourth-quarter profit on a slump in investment-banking revenue and trading activity, as many of the firm’s individual and corporate clients remain leery about investment prospects.
Morgan Stanley swung from a quarterly profit of $871 million a year ago to a loss of $227 million in the fourth quarter of 2011 because of weakness in its institutional securities business as well as a large legal settlement with bond insurer MBIA. Revenue in Morgan Stanley’s institutional business fell by 42%.
Bank of America had better-then-expected results, posting a profit just shy of $2 billion, as weaknesses in trading (profits down 73%) and investment banking (fees 34% lower) were more than offset by large one-time asset sales. These sales included divestiture of a major interest in China Construction Bank and some Canadian credit card operations.
Citigroup’s profit fell 11% from a year earlier, and its revenue slipped by 7%. The global bank is aggressively cutting costs but has been challenged by weak capital markets, as equity underwriting, trading, and advisory revenue fell.
BlackRock’s profit declined 16% as the number-one global money manager by assets saw a shrinkage in assets under management, investment advisory fees, and securities lending revenue. BlackRock’s overall revenue fell 11%.
Wells Fargo, the largest U.S. consumer lender, reported a 20% increase in its fourth-quarter profit on improvements in its consumer loan portfolio and limited exposure to investment banking.
Tech bellwether Intel has strong quarterIntel posted a 5.7% gain in fourth-quarter earnings as the technology bellwether’s business withstood tougher competitive pressures and economic constraints in Europe and China. Intel’s revenue rose 21% on strong demand from a number of its business divisions.
Google’s 7% profit growth disappointsSearch engine giant Google posted weaker-than-expected earnings results despite a 7% profit growth and 25% rise in revenue from its year-earlier period. These numbers were down sharply from its third-quarter results of a 26% profit growth and 33% gain in revenue.
IBM software success offsets hardware weaknessIBM grew its fourth-quarter earnings 4.4% as gains in software and services revenue offset a slowdown in its hardware business.
Microsoft flat profit beats expectationsSoftware giant Microsoft profited from strength in its Office program suite and Xbox gaming system to outweigh weakness in its Windows operating system. For its second fiscal quarter, ended December 31, Microsoft’s overall earnings were down by the slightest margin, to $6.62 billion from $6.63 billion.
GE profit slides 18%General Electric’s fourth-quarter earnings fell 18% on a decline in revenue after it sold its majority stake in NBC Universal. However, GE’s industrial business saw infrastructure orders grow 15% from a year earlier. Revenue shrank 7.9% overall.
Japanese group to pay $7.3 billion for RBS aircraft leasing businessA group of Japanese companies, headed by Sumitomo Mitsui Financial, has agreed to buy the Royal Bank of Scotland’s aircraft leasing business for $7.3 billion, the British bank’s largest divestiture since being bailed out three years ago. The British government holds an 82% interest in RBS.
The week ahead
- McDonald’s and Apple announce their quarterly earnings on Tuesday, January 24.
- Boeing releases its earnings on Wednesday, January 25.
- Germany’s Ifo survey is released on Wednesday, January 25.
- The National Association of Realtors announces its pending home sales on Wednesday, January 25.
- The Conference Board releases its monthly leading economic indicators on Thursday, January 26.
- The U.S. Department of Commerce publishes its durable goods orders report on Thursday, January 26.
- Ford releases its earnings on Thursday, January 26.
- The U.S. Labor Department releases its initial estimate for fourth- quarter GDP on Friday, January 27.
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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