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

 A multi-week slide in financial markets continued with widespread and deep losses globally, as uncertainty about Greece's ability to form a government fueled speculation about a Greek exit from the eurozone and its common currency. In line with those concerns, Fitch downgraded Greek sovereign debt, and the European Central Bank halted monetary operations to several Greek banks. Bond yields reflected investor risk aversion. Spanish 10-year bond yields rose to more than 6%, and safe-haven German two-, five-, 10- and 30-year bond yields dropped to all-time lows. US 10-year Treasury yields stood at 1.73% Friday morning, after closing Thursday at an all-time low of 1.702%.
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.

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.
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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--

Week in Review: Markets advance on robust profit picture

Global economic news

U.S. Fed to phase out quantitative easingThe Fed announced it would phase out its $600 billion bond-buying program in June. In its first-ever news conference this week, the central bank said it would maintain ultra-low interest rates for the time being.


U.S. gross domestic product up 1.8%U.S. economic growth slowed sharply in the first quarter, to a 1.8% annualized rate, from 3.1% in the last quarter of 2010, the U.S. Department of Commerce reported. Higher prices, especially for gasoline and food, squeezed consumer budgets, winter storms took their toll on economic activity, and a rise in imports reduced the country’s output as well. In addition, the federal government reduced its spending by 7.9%, the sharpest drop in a decade.


U.S. Fed’s inflation gauge rises 3.8%The price index for personal consumption expenditures, the Fed’s key inflation gauge, jumped an annualized 3.8% in the first quarter of 2011. Excluding food and energy items, the price index rose 1.5% during the quarter. The Fed expects the overall inflation measure to climb between 2.1% and 2.8% this year.


U.S. consumer sentiment climbsU.S. consumers were more confident in April than in March, as indicated by a rise in the Thomson Reuters/University of Michigan final index of consumer sentiment to 69.8 from 67.5 in March, which was the index’s lowest level since November 2009. It appears that the improving job market is helping Americans tolerate higher fuel costs.


U.S. jobless claims spikeInitial jobless claims increased unexpectedly by 25,000, to a seasonally adjusted 429,000 in the week ended April 23, the U.S. Department of Labor reported. The four-week average rose by 9,250 to 408,500, marking the first time since mid-February that the average sat above 400,000.


New home sales lag in the United StatesSales of new homes increased by 11.1% in March from February. However, sales were down 21.9% from a year earlier. The median price for a new home sold in March was $213,800, up 2.9% from a month earlier but 4.9% lower than in March 2010. Meanwhile, the Standard & Poor's/Case-Shiller index of property values in 20 cities fell 3.3% from February 2010 to February 2011, underscoring the continued housing market weakness.


Durable goods orders upNew orders for durable goods increased 2.5% in March, the Commerce Department reported. The strength of this report stood in sharp contrast to some other economic reports, and it supports the view that any economic slowdown related to commodity price increases or poor weather could be temporary and brief. The durable goods report pointed to strong growth in a variety of areas, including metals, machinery, computers, software, and automobiles.


Japanese industrial output plummets after earthquakeThe impact of the March 11 earthquake and tsunami was very clear in the country’s report on industrial production in March. According to the Ministry of Economy, Trade, and Industry, output at factories and mines dropped by 15.3% in March from February, the largest monthly decrease since the government began collecting this comparative data in February 1953. In its semiannual report, the Bank of Japan curbed its forecast for growth in real gross domestic product to 0.6% for this year, down from 1.6% in a January forecast. It predicts a strong rebound in 2012, however, to 2.9% growth.


Eurozone inflation up a notch in AprilEuropean inflation reached its fastest pace in more than two years, rising at a 2.8% annualized pace, up from 2.7% in March, according to an initial estimate released by the European Union’s statistics office. An index of executive and consumer sentiment fell to 106.2 from 107.3 in March, indicating a potential gradual slide in business and consumer confidence. Separately, the Markit Eurozone Retail Purchasing Managers Index eased to 52.2 in April from 53.5 in March but remained above its long-term average.

Global corporate news

Oil giants pump up profitsVery strong first-quarter results indicate the oil industry is poised to enjoy substantial profits in 2011. Exxon Mobil reported a 69% jump in first-quarter earnings, Royal Dutch Shell posted a 60% rise in profits, ConocoPhillips’ first-quarter earnings rose 44%, and Chevron's first-quarter earnings grew 36%. All four benefited from higher oil prices. Exxon and Conoco attributed some of the robust results to strong refining margins. Shell mentioned growth in upstream production and ongoing cost-cutting. Exxon also enjoyed a rise in production volumes, while Conoco achieved its results despite a sharp drop in production. Chevron posted stronger refining margins.


French oil company Total reported a 35% rise in adjusted net profit on higher crude oil and natural gas prices. The firm’s unadjusted net profit was 51% higher than a year earlier.


Automakers post varied resultsGlobal automakers were all over the map in their first-quarter earnings. Ford Motor reported a $2.6 billion quarterly profit, its largest first-quarter profit since 1998. However, Honda Motor said its quarterly earnings fell 38% as it struggled to find enough auto parts to bring factory production above 50% capacity. Honda warned that earnings would remain weak for the next two quarters. Meanwhile, Ford said it idled a manufacturing plant in Taiwan and a South African assembly plant as precautionary moves to help conserve parts.


Volkswagen reported a vastly improved net profit on booming emerging market demand. Mitsubishi Motors posted a 42% decrease in its fiscal fourth-quarter earnings because of the yen’s strength and lower domestic production. Daimler’s profit nearly doubled in the first quarter and its revenue rose by 17%, driven by accelerated demand for luxury cars.


Deutsche Bank reboundsDeutsche Bank had its best first quarter since 2007. The large German bank’s net profit rose 7%, benefiting from its recent acquisition of retail bank Postbank, which helps to diversify Deutsche Bank’s mix of banking businesses.


Microsoft profits up, but Windows sales downDespite sharply rising quarterly profits on robust sales of Office and Xbox, Microsoft reported a decline in the sales of its Windows operating system as demand for traditional personal computers weakened because of competition from tablet devices.


Caterpillar soars on emerging market salesCaterpillar, the world’s largest construction equipment maker, surpassed first-quarter earnings estimates on surging sales in developing countries. Net income was more than five times higher than a year earlier, while sales climbed 57%.


Merck tops estimates on cost-cutting, higher salesMerck, the second-largest U.S. pharmaceutical firm, posted a higher-than-estimated first-quarter profit, benefiting from cost reductions and rising sales of its Januvia diabetes pill, which more than offset revenue losses to generic competition.

The week ahead

• Among companies scheduled to release first-quarter earnings are Pfizer, Marathon Oil, Comcast, MasterCard, MetLife, and News Corp.
• The ADP monthly employment report is released Wednesday, May 4.
• Germany’s manufacturers' orders report is released Thursday, May 5.
• The U.S. monthly nonfarm payroll report is released Friday, May 6,
• The U.K. producer price index is released Friday, May 6.

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--

Week in Review: U.S. markets have strong first quarter amid global uncertainty

Global economic news

U.S. economy creates 216,000 jobs; unemployment rate dips to 8.8%In a sign that the U.S. labor market may be strengthening, the nation’s companies added 216,000 jobs in March, more than the 190,000 gain projected by a number of leading economists. The U.S. Department of Labor reported that the jobless rate fell again in March to a two-year low of 8.8%. The government’s jobs creation figure is even higher than the 201,000 jobs ADP Employer Services estimated were added to U.S. payrolls last month.

Home prices in U.S. drop again in JanuaryThe average price of single-family homes in 20 major U.S. metropolitan areas fell 3.1% from a year ago, according to the Standard & Poor’s/Case-Shiller Home Price Index. January is the sixth month in a row that U.S. home prices have fallen. Eighteen of the twenty markets covered by the survey recorded year-over-year price declines.

Consumer spending in U.S. rises in FebruaryU.S. consumer spending jumped 0.7% in February, the eighth-straight month of increases. In addition, the U.S. Department of Commerce said that personal incomes rose 0.3% for the month. Still, higher consumer prices absorbed a significant portion of the spending increase. After inflation, the increase was a more modest 0.3%.

U.S. Treasury recoups TARP fundsThe U.S. Department of the Treasury reported that money it loaned to banks during the financial crisis has been paid back. The federal bailout and its Troubled Asset Relief Program (TARP) is currently $6 billion in the black. Still, according to published reports, Treasury Secretary Timothy Geithner admitted that the federal government has “more work to do repairing the damage caused by the crisis and strengthening the recovery, but today is an important milestone in our efforts to recover taxpayer dollars as we continue winding down TARP.”

Confidence of U.S. consumers falls from three-year highThe Conference Board’s Consumer Confidence Index fell more than anticipated to 63.4 in March from a revised 72.0 in February. The sharp decline in confidence was driven by a number of global and economic factors, including rising gas and oil prices, the Japan crisis, and ongoing unrest in the Middle East.

America’s CEOs report encouraging outlook for sales, jobsThe Business Roundtable, an association of CEOs at the largest U.S. companies, reported in its first-quarter survey that nearly all its members expect sales to increase over the next six months. More than 60% expect additional investment in their businesses, and over half plan to hire more workers in the next two quarters.

U.S. businesses expand at a faster-than-expected paceThe Institute for Supply Management said its business barometer slipped to 70.6 in March from a reading of 71.2 in February. The index surpassed the 69.6 median projected by economists surveyed by Bloomberg News. An index reading greater than 50 indicates business expansion.

S&P downgrades Greece, PortugalRatings agency Standard & Poor’s lowered its rating of Greek sovereign debt two notches to “BB-” from “BB+,” dropping the country’s debt further into junk territory. S&P also cut Portugal’s senior debt rating by one notch to “BBB-” from “BBB.” The most recent cut follows last week’s two-notch downgrade of Portugal, which is now close to losing its investment-grade status for the first time. The outlook for both countries’ ratings remains negative, according to S&P. Greece has already accepted a three-year plan of emergency help from the European Union and International Monetary Fund. Standard & Poor’s expects Portugal to ask the IMF and the European Financial Stability Facility for a similar bailout package.

Irish banks need additional €24 billionA plan to nationalize Ireland’s banking sector may be imminent after a third round of stress tests revealed that the country’s banks will need an additional capital influx of €24 billion. The stress tests are a condition of the bailout the Irish government agreed to with the European Union and International Monetary Fund in November. With the latest bailout, the total cost of the bank rescue is approximately €70 billion. Ireland’s government also announced plans for an overhaul of the country’s banking system aimed at restoring investor confidence.

Eurozone confidence slips in MarchAn index of executive and consumer sentiment in the 17-nation euro region fell slightly to 107.3 in March from a revised 107.9 in February, the European Commission said. The drop in the confidence measure was larger than economists had forecast, as rising oil prices, Middle East unrest, and Japan’s earthquake resulted in rising pessimism for global growth prospects. February’s reading was the highest for the index since August 2007.

German unemployment falls to lowest level since 1992The number of Germans who were out of work dropped a seasonally adjusted 55,000 to 3.01 million, according to the Nuremberg-based Federal Labor Agency. That is the lowest level since June 1992. Germany’s unemployment rate fell to 7.1% in March from 7.3% the month before.

Global corporate news

Fujitsu says impact of Japan’s earthquake to be in “billions of yen”Following the country’s March 11 earthquake and tsunami, Japanese electronics conglomerate Fujitsu will have to revise its earnings forecasts for the fiscal year ending this month. Fujitsu’s president said the quake’s impact on earnings “will likely exceed several billions of yen.” Fujitsu, which has resumed most of its operations in the quake-hit region, is among several major Japanese companies affected by one of the largest natural disasters in the country’s history.

Harry & David to file for bankruptcy protectionHarry & David announced it is preparing to file for Chapter 11 bankruptcy protection. In a “prearranged” deal with creditors, the specialty gourmet fruit retailer will convert its bond debt to equity and seek to raise additional capital through a new stock sale. The company has been struggling as consumers cut back in the weak economy. In January, the 75-year-old retailer reported that revenue during the critical holiday quarter fell nearly 2%, and last month the company cut approximately 100 jobs.

EBay to buy GSI Commerce for $2.4 billionEBay agreed to purchase e-commerce company GSI Commerce for $2.4 billion, extending eBay’s reach into Internet retailing and intensifying the company’s rivalry with Amazon. GSI’s core business is providing e-commerce infrastructure — e-store technology, payment processing, fulfillment, marketing, and customer service — for more than 180 top brands and retailers.

GE to purchase stake in ConverteamGeneral Electric agreed to pay $3.2 billion in cash for a controlling stake inConverteam, the power conversion company. The acquisition of the French company, which serves a variety of industries including oil and gas companies, is the latest in a string of deals totaling $11 billion over the past six months aimed at expanding GE’s energy business. They have also acquired Dresser Inc., Wellstream Holdings, Lineage Power Holdings, and John Wood Group’s well support division.

Qihoo goes publicChinese Internet company Qihoo 360 went public this week on the New York Stock Exchange, and the company’s shares immediately doubled at the start of trading. The Internet software company, which sells antivirus software and security services, raised more than $175 million in its IPO. Qihoo also makes the second-most-used Internet browser in China, behind Microsoft’s Internet Explorer.

Galaxy reports profit dropGalaxy Entertainment Group said its net profit fell 22% last year in part because of one-time accounting and valuation adjustments. The casino operator, controlled by the family of tycoon Lui Che Woo, reported that net profit totaled HK$898.46 million last year, down from HK$1.15 billion in 2009. Galaxy is moving ahead with plans to open a HK$14.9 billion casino-resort in Macau’s lucrative Cotai area.

The week ahead

• Institute for Supply Management’s Services Index data released Tuesday, April 5
• China’s Consumer Price Index released Wednesday, April 6
• U.S. initial jobless claims data released Thursday, April 7
• U.S. consumer credit data released Thursday, April 7
• Bank of England announcement due Thursday, April 7
• Canada’s Labour Force Survey results due Friday, April 8

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--

Week in Review: Positive growth and earnings reports push global markets higher

Global economic news

U.S. economy grew 3.1% in the fourth quarterThe U.S. economy grew more than had been estimated in the fourth quarter of 2010, according to revised figures from the U.S. Department of Commerce. The 3.1% annual rate of growth was led by a 4% rise in consumer spending. The 2010 U.S. economic growth rate of 2.9% was the country’s highest annual growth rate in five years. Corporate profits rose 29% last year, their largest annual gain since 1948.


Portugal's crisis deepens; prime minister resignsPortugal’s political and economic crisis deepened as it came closer to an international bailout after the country’s parliament rejected a proposed austerity plan and the prime minister resigned. The cost of Portuguese borrowing hit a new high after the country’s debt was downgraded by two notches by Standard & Poor’s, to BBB from A, and Fitch cut its rating for Portugal to A-.


New eurozone bailout fund createdEuropean finance ministers set up a new bailout fund that will be able to lend €500 billion ($710 billion) to eurozone member nations in need. The fund, which will require €80 billion in cash from the 17 eurozone countries, will replace the current temporary fund in 2013.


U.S. consumer sentiment downConsumer sentiment in the United States fell more than expected in March on higher gasoline prices and in the wake of Japan’s earthquake and tsunami. The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell to 67.5, its lowest reading since November 2009, from 77.5 in February.


U.S. new home sales hit record lowSales of new single-family homes fell to a record low in February, with prices dipping to their lowest point since December 2003, according to a report from the Commerce Department. Home sales fell 16.9% in February from the previous month to a seasonally adjusted level of 250,000 units, the lowest since records began in 1963. February sales were down 28% from a year earlier.


U.S. existing home sales down 9.6%Sales of existing, or previously occupied, U.S. homes slid 9.6% in February to their lowest level in almost nine years, the National Association of Realtors reported. The results were worse than forecast.


U.S. jobless claims fallA trend of fewer first-time jobless claims continued in the week ended March 19, as unemployment benefits claims fell by 5,000 to 382,000. The four-week moving average fell to 385,250, its lowest level since July 2008. And, the total number of people continuing to receive jobless benefits declined by 2,000 to 3.72 million, the smallest amount since September 2008.


U.S. durable goods orders slowU.S. orders for durable goods fell 0.9% in February, the third decline in four months for manufacturers’ orders for goods meant to last at least three years. Despite the recent downturn, year-to-date orders are 7.6% higher than for the same period last year.


Japanese consumer prices continue to slideJapan’s core consumer price index fell 0.3% in February from a year earlier, the 24^th consecutive month it has declined. Analysts are unsure what impact the March 11 earthquake and tsunami will have. Reconstruction spending could put pressure on prices to rise, possibly offset by weakening consumer spending.


Ireland's economy shrinksIreland’s gross domestic product shrank by 1.6% in the fourth quarter of 2010, according to the country’s Central Statistics Office. The country’s gross national product shrank 2.1% in 2010 after a 10.7% decline in 2009.


Eurozone recovery slowsEconomic recovery in the eurozone continued in March, but at a slower pace, according to Markit Economics’ composite purchasing managers' index, which fell to 57.5 from 58.2 in February.


U.K. inflation reaches 4.4%U.K. annual inflation rose at its fastest rate in more than two years in February, up from a 4% annual increase in January. Inflation now is at twice the Bank of England’s targeted 2% rate, putting pressure on the central bank to increase its interest rate. Contributing to higher inflation are increases in the cost of housing services such as water, electricity, gas, and other fuels.

Global corporate news

AT&T purchase of T-Mobile to be reviewed closelyAT&T has agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion, creating the largest cellular company in the United States, and leaving only two other major U.S. competitors – Verizon and Sprint Nextel. However, the proposed deal is expected to face very close scrutiny and a political battle in Washington, as politicians consider the impact on competition, costs, and consumers.


Oracle income rises after its Sun acquisitionBusiness software developer Oracle reported a 78% jump in income on a 37% rise in revenue for its fiscal third quarter. Results were boosted by its acquisition of Sun Microsystems a year ago.


Japan’s manufacturers begin to resume operationsJapan’s automakers had mixed plans for resuming production after the earthquake. Nissan Motor restarted its auto assembly operations and parts manufacturing this week, while Toyota Motor plans to resume production of three hybrid models next Monday, March 28. Honda Motor extended the suspension of its two domestic auto assembly operations through April 3 and canceled orders for May. One issue affecting these firms was inconsistent power supply for makers of computer chips used in the vehicles. Manufacturing stoppages could curb global auto production – estimated at 75 million vehicles this year – by 5 million units.


U.S. Federal Reserve denies Bank of America dividend increaseThe Federal Reserve Board rejected a Bank of America proposal to increase its dividend in 2011. The central bank gave no reason for the rejection, which led observers to speculate that it had to do with results of the latest government stress tests for the nation’s 19 largest holding companies.


Inditex profit, sales rise on global expansionSpain’s Inditex, the world’s largest fashion retailer, posted a 32% rise in net profit in 2010. It plans to add up to 500 stores to its 5,044 existing stores in 77 countries this year. Included are 120 new stores slated for China, where Inditex already owns 143 stores.


Best Buy hurt by slow sales, tough competitionBig-box electronics retailer Best Buy saw its fourth-quarter earnings fall 16% on weak computer and television sales and stiff competition from online retailers and discount stores.

The week ahead

• Japan’s industrial production report released Tuesday, March 29
• U.S. consumer confidence survey results released Tuesday, March 29
• European Union economic sentiment data released Wednesday, March 30
• U.S. jobless claims data released Thursday, March 31
• Bombardier earnings due Thursday, March 31
• U.S. employment report released Friday, April 1

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--

Week in Review: Oil prices rise, stocks retrench as Libyan violence escalates

Global economic news

Oil futures crest at $100 a barrelCrude oil prices reached their highest levels in more than two years as a result of growing violence and oil supply disruptions in Libya. Oil futures in London hit $120 a barrel on Thursday before receding to $112. The April contract on the New York Mercantile Exchange traded above $103 a barrel on Thursday before retreating below $98. Prices stabilized after Saudi Arabia, the United States, and the International Energy Agency reassured markets that global supplies would be sufficient, even without Libya's production. Just last week, oil had traded in the range of $86 to $87 a barrel.


U.S. economy grows, but shy of the 3.2% forecastU.S. real gross domestic product grew at an annual rate of 2.8% in the fourth quarter of 2010, below the estimate of 3.2%, the U.S. Department of Commerce reported. Real GDP increased 2.6% in the third quarter. Personal consumption expenditures, exports, and nonresidential fixed investments contributed to growth, while personal inventory investment and state and local government spending detracted. Imports, which are deducted from GDP, decreased. Overall, the 2.8% growth figure is consistent with forecasts of a slow-growth economic recovery.


First-time U.S. jobless claims decrease againU.S. initial jobless claims declined for the third time in four weeks, and the four-week average dipped to its lowest level in two and a half years, the U.S. Department of Labor reported. For the week ending February 19, first-time unemployment claims dropped by 22,000 to a seasonally adjusted 391,000. The four-week average fell to 402,000.


U.S. new home sales fall more than expectedSales of new homes in the U.S. fell more than forecast in January, slipping 13% to a pace of 284,000 a year, according to a report from the Commerce Department. Tight credit standards and 9% unemployment are weighing down home construction. However, mortgage rates fell to 4.95% for a 30-year mortgage, a result of the drop in Treasury yields, as investor demand for safe-haven assets rose. Lower rates could help stimulate home sales.



Eurozone confidence risesEconomic confidence within the eurozone, as measured by the European Commission’s Economic Sentiment Indicator, rose to 107.8 from 106.8 in January, its highest reading since September 2007.


U.S. consumer confidence climbsConsumer confidence in the United States rebounded to its highest level since April 2008, based on the Bloomberg Consumer Comfort Index’s -39.2 reading in the week ended February 20, up from -43.4 the previous week.

Global corporate news

GM posts first profit in six yearsGeneral Motors earned $4.7 billion in 2010, its best annual performance in more than a decade and its first yearly profit since 2004. GM’s global sales rose 12.2% in 2010, to 8.39 million. It sold just 30,000 fewer vehicles than Toyota, the automaker that a year ago displaced GM as the world’s largest.


Boeing lands $35 billion government contractThe U.S. Air Force awarded Boeing a $35 billion contract to build aerial refueling tankers, preserving Boeing’s longstanding position as a leading Air Force supplier.


RBS registers small quarterly profitRoyal Bank of Scotland posted a modest profit in the fourth quarter of 2010 and reduced its annual loss to £1.13 billion from £3.6 billion pounds in 2009. Net profit for the fourth quarter was £12 million pounds. The bank’s net interest margin rose while income at its investment banking division fell substantially.


Allianz increases earnings, raises dividendAllianz, Europe’s largest insurer by gross premium income, reported an 11% increase in fourth-quarter net profit on improvements in its property and casualty business, higher revenues, and fewer natural-disaster claims.


European telecom giants stumbleSpanish telecommunications giant Telefonica posted a 45% drop in fourth-quarter net profit because of sharply higher operating costs, while Deutsche Telekom’s loss deepened as a result of steeper impairment and restructuring charges (€400 million) in 2010.


Toyota recalls 2.2 million vehiclesToyota announced a recall of 2.2 million vehicles over the much-publicized sticky-accelerator pedal problem, which has caused pedals to become trapped under floor mats because of faulty design.

The week ahead

• Chicago PMI purchasing managers survey released Monday, February 28
• Canadian GDP data released Monday, February 28
• European Union unemployment rate released Tuesday, March 1
• European Union GDP data released Thursday, March 3
• Canadian banks to post earnings Tuesday, March 1 (BMO) and Thursday, March 3 (RBC and TD Bank)
• U.S. nonfarm payrolls data released Friday, March 4

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--

Week in Review: Investors optimistic that recovery gaining steam as earnings season kicks into high gear -- For the week ended January 28, 2011

Global economic news

Americans more optimistic about economy
The 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 swing
Johnson & 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.

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.

--see disclaimer below--

Week in Review: Markets trend slightly upward on signs of growth

U.S. economic news

U.S. Congress passes $800 billion tax cut
After much negotiation, Congress approved an $858 billion bill, with $801 billion in tax cuts and $57 billion for extended unemployment insurance. The bill had bipartisan support as both Democratic and Republican lawmakers sought to prevent the across-the-board tax increase that would have occurred with the expiration of Bush administration tax cuts set for December 31.

Fed reaffirms plan to buy bonds
The Fed restated its intention to buy $600 billion in government securities in the next half year in an ongoing effort to stimulate the U.S. economy, bring down high unemployment, and avert deflation.


U.S. retail sales rise again; economic growth revised upward
Retail sales rose for the fifth-straight month in the United States, according to the U.S. Department of Commerce, matching their highest level since November 2007, before the recession began. Retail sales increased by 0.8% in November, and the October sales figure was bumped up to 1.7% growth from a previously estimated 1.2% increase. The stronger-than-expected retail sales prompted Macroeconomic Advisers to boost its tracking forecast for fourth-quarter gross domestic product to 3.1% from 2.7%.

Eurozone's weakest economies struggle
Despite signals of eurozone optimism this week, negative developments focused on the struggling economies of Spain, Greece, and Ireland. Moody's Investors Service downgraded Ireland's debt by five levels, to Baa1 from Aa2, a drop that reflected that the country's staggering banking losses and vulnerability to further economic weakness. Moody's also announced that it would put Spain's Aa1 government bond ratings on review for a possible downgrade. Meanwhile, Greek workers staged a nationwide general strike in protest against government austerity measures. Transportation was almost brought to a standstill. Hundreds of flights were cancelled and ferry and rail services suspended. Government offices, courts, hospitals, and schools were also affected.

EU summit produces accord
At an economic summit, European Union leaders agreed to create a mechanism that would contain future debt crises through cross-border guarantees between member states. The agreement led to strengthening of the euro against 15 of its most-traded counterparts.

German business confidence soars
German business confidence rose to its highest level since 1991, with the Munich-based Ifo institute's business climate index hitting 109.9 in December, up from 109.3 in November. Germany's unemployment rate fell for the seventeenth straight month in November, reaching its lowest rate - 7.5% - since April 1992.

German investor confidence also rose in December, with the German ZEW expectations survey climbing for the second month in a row, supported by increasingly broad-based economic growth. Expectations in the survey rose to 4.3 from 1.8 in November.


European economic growth uneven
Industrial production across the 16-country Eurozone grew 0.7% in October, the most recent month reported, and 6.9% annually, according to Eurostat, the European Commission's economic statistics agency. Also, while employment contracted 0.7% in both Greece and Spain during the third quarter, it grew 0.3% in Germany and 0.2% in France over the same period.

India, China forge stronger ties
A high-profile visit to India by Chinese Premier Wen Jiabao and 400 business executives set the stage for $20 billion in announced business deals between China and India. The countries set a $100 billion target for bilateral trade by 2015. India-China trade is expected to exceed $60 billion this fiscal year, up from $42 billion for the last fiscal year.

Inflation high in both India and China
India's annual inflation rate eased in November but remained elevated at 7.48%, down from 8.58% the previous month. Meanwhile, China's consumer price index increased 5.1% in November from a year earlier. China's government said it would raise its inflation target for 2011 to 4% from 3% this year. Observers noted that this could be a sign of greater tolerance for inflation, which could mean less aggressive tightening going forward.


U.S. jobless claims down
The number of U.S. workers filing initial claims for unemployment insurance fell by 3,000 to 420,000 in the week ended December 11, the U.S. Department of Labor reported. The four-week average confirmed the positive trend, declining by 5,250 to 422,750, its lowest level since August 2, 2008.


U.S. inflation tame
The U.S. Consumer Price Index increased 0.1% in November from October. The core CPI, excluding food and energy costs, also rose 0.1%. For the 12 months ended in November, prices rose 1.1% overall and 0.8% for the core CPI. This indicates inflation is not an immediate concern for the Fed, which frees it to pursue more stimulative action.

Global economic news

FedEx raises earnings outlook, is optimistic about global economy
Despite an 18% decline in quarterly profit, FedEx raised its annual earnings forecast on optimism about global economic trends. The courier, the world's largest international package-shipping firm, is viewed as an economic bellwether. Its quarterly results were brought down by legal charges and restructuring costs, but its international air freight business had improved demand and pricing.

Oracle posts robust profits
Oracle's second-quarter earnings rose 28% on strength in the business-software giant's traditional software business and its new hardware line. The company attributed the robust results to strong revenue growth and disciplined business management.


National Semiconductor earnings soar
Sharply higher sales and improved profit margins led National Semiconductor to a 78% jump in second-quarter profit. However, the chip maker issued a lukewarm revenue outlook.


RIM's profit soars on Blackberry sales
Canadian Blackberry maker Research in Motion's quarterly earnings leapt 45% as the sales volume of the company's popular smart phones rose 40% from a year earlier in the most recent quarter. However, the company faces tough competition from Apple's iPhone and Google's Android platform.


Bank of Montreal, Canada's fourth-largest bank, said it will acquire Marshall & Isley, a Milwaukee, Wisconsin-based bank, in a $4.1 billion share swap that will double BMO's presence in the U.S.

The week ahead

• Third quarter U.S. GDP estimate released Wednesday, December 22
• Final figures for third quarter UK GDP released Wednesday, December 22
• U.S. durable goods orders for November due out Thursday, December 23
• University of Michigan Consumer Sentiment Index released Thursday, December 23
• Nike, Carnival, and Walgreen's earnings reports due

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

Week in Review: Stocks tenuous as G-20 wraps up without firm recovery plan

U.S. economic news

Trade gap narrows more than expected
The U.S. trade gap fell 5.3% to $44 billion in September from $46.5 billion in August, according to the U.S. Department of Commerce. The trade deficit is $379.1 billion year to date, up 40% from the same period last year. U.S. exports were $154.1 billion in September, their highest level in over two years. Imports were $198.1 billion for the month. Exports were boosted by service-sector exports and a weak U.S. dollar.


New jobless claims drop to lowest level since July
The U.S. Department of Labor said that the number of first-time filers for unemployment benefits decreased 24,000 to 435,000 in the week ended November 6. The decline brings new jobless claims to their lowest level in four months. The better-than-expected weekly numbers follow last week's optimistic jobs report, which said 151,000 workers were added to nonfarm payrolls in October.


Federal commission proposes $4 trillion in deficit cuts
The federal government's 18-member fiscal commission released a preliminary report that recommends reducing the deficit by $4 trillion over the next 10 years. The report, which has drawn criticism from the political left and the right, calls for significant spending cuts beginning in 2012, including cuts in Social Security benefits, reductions in domestic and defense spending, and the elimination of popular tax breaks. The commission will make its formal recommendations to President Obama on December 1.

U.S. and global corporate news

Third-quarter earnings continued to climb, with nearly 75% of companies in the Standard & Poor's 500 Stock Index reporting profits that are up significantly from a year ago.


General Motors contributed to the quarter's overall positive earnings results by reporting a profit of $1.96 billion as revenue rose 20%. It was the automaker's third-straight quarterly profit and its best quarter since 1999. The latest results were a marked turnaround from the $1.2 billion loss the company posted a year ago. GM's earnings report was released ahead of next week's planned initial public offering - the first time the company is selling shares to the public since it emerged from bankruptcy in July 2009.


Macy's posted a profit of $10 million for the period ended October 30, compared with a prior-year loss of $35 million. The company has benefited from prior consolidations of its divisions, the introduction of several new brands, and a strategy to tailor its offerings to local markets. The turnaround for the department store operator could be a positive sign for retailers, as Macy's typically kicks off the earnings season for major retailers and is seen by many analysts as a barometer of consumer spending.


Cisco Systems reported solid quarterly results but issued a weak sales forecast for the second straight quarter. The computer network equipment maker projected its revenue will increase by less than half of what analysts had projected for its November through January quarter. That disappointing outlook triggered a selloff in technology companies on Thursday.

Global economic news

Tensions high, expectations low as G-20 summit convenes
World leaders met for the Group of 20 Summit in Seoul, South Korea, this week to debate international trade imbalances and develop plans to support a global recovery. Major topics discussed during the two-day summit included currency manipulation, trade gaps, and protectionism. The United States faced a number of setbacks throughout the meetings as President Obama was unable to secure a bilateral free trade agreement with South Korea. The United States was also the target of severe criticism from a number of countries, including China, Japan, Russia, Germany, and the eurozone following the Fed's controversial decision last week to buy $600 billion in U.S. Treasury securities over an eight-month period.


U.S. delegation faces roadblocks in Seoul, especially with China
The United States entered the trade gap discussions at a significant disadvantage. While the U.S. trade gap narrowed slightly to $44 billion in September, China announced a huge trade surplus, $27.2 billion in October, up a staggering 61% from September. The widening trade gap has only heightened tensions between the two countries. The United States was unsuccessful in pressuring China's President Hu Jintao on the importance of currency revaluation, in part because of the Fed's second round of quantitative easing. China believes the Fed's latest move will lead to continued depreciation of the U.S. dollar and an eventual creditor crisis. As a result, the state-backed Dagong Global Credit Rating Co. on Tuesday downgraded its credit rating for the United States to "A+" from "AA."

Leaders of the G-20 nations, despite failing to agree on definitive recovery steps, particularly on the U.S.-China currency dispute, outlined a number of macroeconomic policies and agreed to "refrain" from all-out currency warfare.


China inflation rate hits 25-month high
China's inflation rate jumped to 4.4% in October, according to a Beijing statistics bureau report. The increase was due largely to a 10.1% increase in food prices. The increase exceeded the country's official target rate of 3.0% and was a significant jump from September's 3.6% rate. Although inflation has so far been restricted to food, price increases could spread as funds from Beijing's economic stimulus measures and a surge in bank lending begin to impact the economy.

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.

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

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