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.

--see disclaimer below--

Week in Review: Stocks mixed as investors weigh eurozone bailout hopes against slowing economy

U.S. and global economic news

Germany agrees to increase bailout contributionGermany's parliament approved legislation to increase the eurozone bailout fund's lending capacity to €440 billion, from around €250 billion, and to make the fund more flexible. The move was lauded as the clearing of a major hurdle in the path to the containment of Europe's sovereign debt crisis. Also this week, the Greek Parliament approved a new property tax law in a closely watched vote, a key step in the country's efforts to secure further aid.

Standard & Poor's and Fitch downgrade New Zealand's debtStandard & Poor's and Fitch Ratings downgraded New Zealand's local currency debt amid concern that government and household debt are expanding. New Zealand is the first Asia-Pacific nation in a decade to have its debt cut from AAA. S&P cut the local currency debt one level to AA+. Foreign currency debt was cut to AA from AA+.

Eurozone inflation hits three-year highEuropean inflation unexpectedly accelerated at the fastest pace in almost three years; the rate for September jumped to 3% from 2.5% in August. The increase further complicated the work of the European Central Bank as it fights to contain the region's debt crisis. Germany's inflation rate rose in September to 2.8%, from 2.5% in August.

Chinese manufacturing shrinks for third monthChinese manufacturing shrank for the third month in a row as measures of new orders and export demand fell. 

U.S. consumer spending, new home sales fallU.S. consumer spending slowed in August as incomes unexpectedly dropped for the first time in almost two years; that drop forced households to dig into their savings. Purchases rose 0.2% after a 0.7% increase the previous month. Also in August, sales of new homes fell to a seasonally adjusted annual rate of 295,000, which was down from 302,000 a month earlier. The inventory of new homes fell to 162,000, the lowest level on record since 1963. In July U.S. home prices rose for a fourth month but remain lower than they were a year ago.

U.S. and global corporate news

Amazon debuts Kindle FireAmazon, the world's largest online retailer, debuted its e-reader Kindle Fire. The company is betting that its device, which is smaller and less than half the price of Apple's iPad, can present a challenge to that popular product.

BofA to charge for debit card useBank of America announced plans to charge customers $5 per month to use their debit cards. Other banks are expected to follow with similar moves, which are intended to make up for funds lost to a new regulation that puts a cap on how much banks can charge merchants for debit card transactions.

The week ahead

• The Institute for Supply Management reports on national manufacturing activity on Monday, October 3.
• Markit publishes its eurozone purchasing managers index on Monday, October 3.
• The Bank of Japan ends its two-day policy meeting on Friday, October 7. 
• The U.S. Bureau of Labor Statistics releases the unemployment rate on Friday, October 7.

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: Stocks higher as debt deals and positive earnings cheer investors

U.S. and global economic news

European leaders agreed to aid package for GreeceEuropean leaders on Thursday agreed on a plan to reduce Greece's debt burden in an effort to prevent contagion to other weak economies in the eurozone. The overall size of the bailout package to cover Greece's financial gap is €109 billion and will include the participation of the International Monetary Fund and the private sector. The plan also cuts interest rates on bailout loans to Greece and doubles the repayment period to 15 years. Officials said the interest rates on Ireland's and Portugal's bailout loans will be cut to the same low level. European leaders also agreed on new steps to prevent the spread of Greece's debt problems. In the wake of the debt deal, Fitch Ratings said the role of the private sector in the Greek bailout plan would constitute a "restrictive default." In other words, the proposed debt exchange implies a 20% net present value loss for banks and Greek government debt holders. 



U.S. lawmakers continue debate over deficit reduction dealIn the United States, Congress and the White House continued negotiations to cement a deal to increase the government's borrowing authority while cutting spending and overhauling the tax code. The White House has said if the government's $14.29 trillion debt ceiling is not raised by August 2, the United States will run out of cash to pay its bills. Standard & Poor's repeated  a warning that there is a 50% chance that it will lower the U.S. credit rating within three months. The company first warned of this possibility on July 14. 


Weekly U.S. jobless claims riseU.S. jobless claims unexpectedly rose last week after declining for two weeks in a row. Claims increased  by 10,000 to a seasonally adjusted 418,000, after declining for two weeks in a row. The four-week moving average of new claims, considered a more reliable indicator of the performance of the labor market, fell last week by 2,750 to 421,250. Economists consider the economy to be adding more jobs than it is shedding when  the weekly claims number falls below 400,000.


German business confidence fallsGerman business confidence fell more than expected in July, according to the Ifo Institute's business climate index, which dropped to its lowest level in nine months.



U.S. home sales fallSales of previously owned homes fell 0.8% in June to a seasonally adjusted annual rate of 4.77 million, the lowest level in seven months, amid weakness in the job market and overall economy. It was the third-straight monthly decline and worse than forecast. Also in June home construction rose to the highest level in five months. Compared with the same month a year earlier, new home construction was up 16.7%; however construction is still below a healthy level, which economists say would be a pace of 1 million to 1.5 million units. In June, that annual level was at 629,000. Meanwhile, the National Association of Home Builders reported that confidence among homebuilders rose in July from June but remained at depressed levels as the housing market continued to struggle.


U.S. leading indicators riseThe Conference Board reported that its index of U.S. leading indicators rose 0.3% in June  from a 0.8% increase  in May. The gauge measures the outlook for the next three to six months.


U.S. and global corporate news



Morgan Stanley performance surprises investorsMorgan Stanley posted a smaller-than-expected second-quarter loss, which sent the company's stock surging the most in two years. The loss came from a $1.7 billion charge related to the conversion of Mitsubishi UFJ Financial Group's preferred Morgan Stanley stake. Morgan Stanley posted a 14% gain in trading revenue and was the only major U.S. bank to report a gain in this area. Bank of America reported losses of $8.83 billion in the second quarter as mortgage-related charges outweighed lower credit costs. Goldman Sachs Group's second-quarter profit came in at $1.05 billion, significantly lower than expectations, after market conditions led the firm to reduce risk taking to the lowest levels in five years. Even so, profits rose 77% from $613 million a year ago.



Tech companies report strong profitsApple's fiscal third-quarter earnings more than doubled, exceeding analysts' expectations, as the company reported surging sales of the iPhone and iPad. Microsoft's profit rose 30% in its fiscal fourth quarter helped by the software and service contracts of its corporate customers. IBM reported an 8% increase in net income as the 100-year-old company got a boost from robust sales of new models of its mainframes. The company also lifted its profit forecast amid buoyant demand for software. Intel, the world's largest chipmaker, reported that its sales rose 21% while net income rose to $2.95 billion from $2.89 billion in the year-earlier quarter. The company also forecast third-quarter sales that exceeded some analysts' estimates. EMC reported a 28% gain in second-quarter earnings as companies increased spending on storage products and software for Internet-based computing, and eBay reported a 25% jump in revenue, while net income fell 31%.


Coke, Johnson & Johnson, and Harley-Davidson announce resultsCoca-Cola's second-quarter profit rose 18%. The company got a boost from a bottler acquisition and from strong volume growth overseas. Johnson & Johnson reported a 20% decline in second-quarter profit on costs associated with its exit from its heart-device business and product recalls. Profits, however, exceeded Wall Street expectations. Harley-Davidson, the largest U.S. motorcycle manufacturer, said profit rose after it increased sales in the U.S. market for the first time in almost five years.



Borders to liquidate remaining storesBorders was forced to liquidate its remaining 399 stores after receiving too few bids in a bankruptcy auction. The company, which employs about 10,700 people, is now expected to go out of business by the end of September.


Zillow raises $69.2 million in IPOZillow, the online real estate information service, raised $69.2 million in its initial public offering.


Express Scripts to buy Medco; CNOOC to purchase OPTI CanadaExpress Scripts agreed to buy Medco Health Solutions for $29.1 billion in cash and stock. In merging, the companies will form the largest manager of drug prescription services with nearly a third of the market. China's largest offshore-oil producer, CNOOC, agreed to buy bankrupt Canadian oil sands developer OPTI Canada for about $2.1 billion. The agreement comes as China seeks to invest in energy projects amid a global commodities boom. In past deals, Chinese firms have targeted minority stakes in Canadian companies.



Harry Potter movie sales set recordThe last of the long-running series of Harry Potter films, Harry Potter and the Deathly Hallows — Part 2, from Time Warner's Warner Bros. Pictures set a sales record for its U.S. opening and took in nearly one half a billion dollars worldwide.

The week ahead

• 3M, Boeing, Exxon Mobil, DuPont, Merck, and Chevron report earnings next week.
• The Standard & Poor's/Case-Shiller Composite-20 Home Price Index is released on Tuesday, July 26.
• The Conference Board reports on consumer confidence on Tuesday, July 26.
• The European Commission publishes its consumer confidence indicator for the eurozone on Thursday, July 28.
• The Nomura/JMMA (Japan Materials Management Association) Purchasing Managers' Index is released Thursday, July 28.

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.

MARKET WEEK: MARCH 28, 2011

The Markets Investors brushed aside disappointing housing data and debt concerns in Europe to push domestic equities higher for the week. The Dow and S&P 500 regained 12,000 and 1,300 respectively and both small caps and the tech-heavy Nasdaq saw new enthusiasm. That renewed interest in stocks helped send the price of 10-year Treasuries back down as yields rose.

Market/Index 2010 Close Prior Week As of 3/25 Week Change YTD Change DJIA 11577.51 11858.52 12220.59 3.05% 5.55% Nasdaq 2652.87 2643.67 2743.06 3.76% 3.40% S&P 500 1257.64 1279.21 1313.80 2.70% 4.47% Russell 2000 783.65 794.66 823.85 3.67% 5.13% Global Dow 2087.44 2093.63 2166.09 3.46% 3.77% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 3.30% 3.28% 3.46% 18 bps 16 bps Last Week's Headlines New-home sales plummeted almost 17% in February, hitting the lowest point since record-keeping began in 1963, the Commerce Department said. Sales also were down 28% from the previous February. Hardest hit were sales in the Northeast, now down 50% from a year ago, and the Midwest, down almost 41% in the same time. Sales of existing homes also fell sharply in February, according to the National Association of Realtors®. The 9.6% decline followed three straight months of increases. Though they were 26.4% higher than last July's low, sales were still down 2.8% from February 2010. All-cash purchases hit a record 33% of all sales, and distressed homes sold at a discount represented 39% of total sales. Durable goods orders fell in February, according to the Commerce Department. The 0.9% drop was the fourth decline in five months. New orders for capital goods (other than defense-related equipment and aircraft), which indicate the level of business spending, were down 1.3%. Despite another downgrade of the country's sovereign debt, the Portuguese parliament rejected a proposed combination of tax increases and budget cuts, potentially increasing the need for a bailout from fellow European Union members. The country's prime minister, who proposed the austerity package, resigned and a new government will need to be formed. Also, Moody's downgraded the credit rating of 30 Spanish banks, citing as one reason pressures from a recent deterioration in that country's sovereign debt, which was downgraded earlier this month. The final figure for Q4 gross domestic product (GDP) showed the economy grew at an annualized rate of 3.1%, higher than previously thought and higher than Q3's 2.6%. For all of 2010, the economy grew almost 3%, a vast improvement from 2009's decline of 2.6%. After-tax corporate profits were up 20.4% in 2010 compared to 2009's 5.1% increase. Eye on the Week Ahead Investors will watch to see if the market continues to recover from its recent bruising and extends its upward march. A data-intensive Friday will see new employment, construction, and manufacturing indicators. Key dates and data releases: personal income/spending (3/28); home prices (3/29); unemployment/payrolls, construction spending, U.S. manufacturing (4/1). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment. --see disclaimer below--

Week in Review: Markets tumble on debt downgrades, trade deficits, oil worries, earthquake, tsunami

Global economic news

Greece, Spain see debt downgradedMoody’s Investors Service downgraded the sovereign debt rating of Spain and Greece this week. On Monday, Moody’s cut Greece’s credit rating by three levels, to "B1" with a negative outlook, from "Ba1." On Thursday, Moody’s cut its rating for Spanish sovereign debt to "Aa2" with a negative outlook, from "Aa1." The news reignited fears that countries with high deficits might bring the eurozone into a new debt crisis.


Data show higher gas prices weigh on consumersThe Reuters/University of Michigan consumer sentiment index fell to its lowest level since October as recent turmoil in Libya left consumers more pessimistic about their current and future economic situation. The report also showed a rise in inflation expectations in line with the surge in gas prices. The rise in gas prices also seemed to chip away at retail sales in the month of February. While sales climbed at the fastest rate in four months, the increase was still smaller than expected.



U.S. trade deficit widensThe U.S. trade deficit widened to its highest level in seven months in January despite a record-high level of exports, as surging oil prices added significantly to the price of imports. The U.S. trade deficit jumped 15% to $46.34 billion in January from $40.26 billion in December, the U.S. Department of Commerce reported. The deficit came in much higher than the $41.5 billion shortfall that had been estimated by economists surveyed by Dow Jones Newswires. Higher prices for oil contributed to the growing trade gap along with strong consumer demand.


Trade balances affected by high oil, commodities pricesChina and Germany surprised the financial world with unexpectedly weak trade reports this week.


China has largest trade deficit in seven yearsChina’s $7.3 billion February trade deficit, its largest monthly deficit in seven years, resulted from a 2.4% increase in exports from a year earlier and a 19.4% rise in imports for the same period. Higher prices for commodities played a key role, with the average price for China’s iron ore imports rising 63%. Oil and soybean costs also rose.


Germany’s trade surplus shrinksGermany’s current account surplus fell to €7.2 billion in January from €19.3 billion in December. From January 2010, exports rose 24.2% and imports were up 24.1%.


Japan reports monthly trade deficitJapan incurred its first monthly trade deficit in two years as its exports rose 2.9% in January while imports grew by 15.6%. Imports of petroleum products rose 38.6%, as the price of crude oil was 18.2% higher than the previous year.


Consumer prices rise in China, GermanyChina’s consumer prices rose 4.9% in February from a year earlier, exceeding the government’s 4% inflation target for a fifth month. In Germany, consumer price inflation was at its highest in more than two years in February, reaching 2.1% annually. The rising cost of energy was a factor in both instances.


U.S. wholesale inventories and sales riseU.S. wholesale inventories rose by 1.1% in January to a seasonally adjusted $387 billion, the highest level since July 2008, while sales rose by 3.4%. Since January 2010, inventories rose 11.9% while sales were 15.4% higher. These strong numbers reflect increased consumer spending as well as greater confidence among businesses.


Confidence grows among U.S. small companiesU.S. small companies were more confident in February than they have been in three years, according to the National Federation of Independent Business’ optimism index, which rose to its highest level since the recession began in December 2007.


Consumer debt rises overall; credit card debt easesU.S. consumer credit rose in January at an annual rate of 2.5% while credit card debt fell to a six-year low, according to the U.S. Federal Reserve Board. Overall consumer credit reached $2.412 trillion, an increase of $5 billion. Revolving credit, or credit-card debt, fell by $4.2 billion to $795.5 billion, marking the twenty-eighth decline in credit card use in 29 months.

Global corporate news

Sales of luxury goods soarsGerman luxury carmakers Audi and BMW had highly profitable years in 2010, signaling that demand for luxury vehicles recovered after almost stalling in 2009. Audi doubled its annual profits in 2010 and improved its operating profit margin to 9.4% from 5.4%. BMW substantially raised its dividends and had a 19% increase in revenue.


EADS posts major profitEuropean aerospace firm European Aeronautic Defence & Space Co. (EADS) reported a fourth-quarter net profit of €355 million, a big improvement from a loss of €1.05 billion a year earlier. The maker of the Airbus, among other aircraft, benefited from cost savings, increased aircraft deliveries, and improved performance in non-Airbus divisions.


AIG repays $6.9 billion to U.S. TreasuryAmerican International Group (AIG), one of the major recipients of the U.S. government’s Troubled Asset Relief Program (TARP), repaid $6.9 billion, reducing the U.S. Treasury Department’s preferred equity stake in AIG. To date, 70% of the $700 billion the government has disbursed through TARP has been repaid.


Coffee rivals Green Mountain, Starbucks team upGreen Mountain Coffee Roasters has agreed to sell Starbucks coffee and Tazo tea in its Keurig brewing system in the fall. Just two weeks ago, Green Mountain announced a deal to sell coffee from Starbucks' rival Dunkin Donuts. In 2010, Green Mountain sold 2.9 million Keurig cup portion packs, a 75% increase year over year.


AOL announces job cutTo streamline its businesses, AOL has begun laying off 20% of its work force with plans to eliminate 950 jobs in the United States and India. Last year, AOL cut about one-third of its work force.

The week ahead

• Bank of Japan and Reserve Bank of Australia meeting Monday, March 14
• U.S. Federal Reserve Board meeting Tuesday, March 15
• U.S. CPI data released Thursday, March 17
• U.S. Conference Board leading economic indicators report Thursday, March 17
• Fedex and Nike earnings due Thursday, March 17

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.


Past performance is no guarantee of future results.

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

--see disclaimer below--

Global economic news 

U.S. economy adds jobs; unemployment rate fallsThe U.S. economy added 192,000 jobs in February, according to the nonfarms payroll report issued Friday by the U.S. Department of Labor. The unemployment rate fell to 8.9% from 9.0% in January. This was the first time the rate has been below 9.0% since April 2009. Job growth was widespread, with gains in manufacturing, construction, services, wholesale trade, and transportation and warehousing. Earlier in the week, Automatic Data Processing (ADP), a payroll services provider, reported that the number of U.S. private sector jobs rose by 217,000 in February.

Initial jobless claims fall in U.S.The Labor Department said that first-time jobless claims by American workers continued their trend downward in the week ended February 26. The number of new claims filed has dropped in four of the past five weeks. First-time claims for unemployment benefits dropped by 20,000 to a seasonally adjusted 368,000. The four-week average now stands at 388,500 — its lowest level since July 2008.

Global manufacturing expandsGlobal manufacturing activity grew in February, based on higher readings on a number of indices. The Institute for Supply Management’s monthly index of U.S. manufacturing rose to 61.4 for the month, from 60.8 in January. That was its highest level since May 2004. The eurozone purchasing managers’ index (PMI) reached 59 in February, up from 57.3 in January, its highest level in 11 years, according to Markit, an economic data provider. China’s PMI fell to 52.2 in February from 52.9 in January. A reading of 50 or greater indicates an expansion of manufacturing activity. China’s reading was said to reflect its week-long Lunar New Year holiday rather than a real slowdown.

German job market improvesGermany’s labor market improved in February, with 52,000 fewer unemployed workers, according to the country’s Federal Labor Office. The jobless rate fell to 7.3% from 7.4%, its lowest level since 1999 when records were first kept.

Oil prices spike on more supply uncertaintyThe threat of a widespread oil supply interruption continued as a result of ongoing unrest and violence in leading Middle East oil-exporting nations, including Libya, Oman, Iran, and Iraq. Oil futures traded above $103 per barrel on Friday, their highest price in two-and-a-half years. U.S. gasoline prices reflected higher global oil prices, with the average price per gallon of regular unleaded gasoline hitting $3.47 by week's end, up from $3.29 a week ago.

ECB issues warning on inflationThe European Central Bank (ECB) announced that it would likely raise interest rates in April and possibly again in July. Eurozone inflation reached 2.4% in February, a 28-month high and above the ECB’s 2% target inflation rate. While the eurozone economy might warrant raising interest rates, a tightening of monetary policy risks choking the flow of capital within the region’s weaker economies.

Global corporate news

Standard Chartered’s earnings rise 29%Standard Chartered, a U.K.-based global lender, registered a 29% gain in its annual profit in 2010, largely on increased wholesale income and a 56% reduction in loan impairment charges.

Petrobras posts strong profitPetrobras, a giant Brazilian energy firm, reported that its fourth-quarter profit rose 38% from a year earlier on higher oil prices and an increase in crude oil production. The company’s revenue rose 14% for the same time period.

Canadian banks increase profitsThree of Canada’s biggest banks, Bank of Montreal, Royal Bank of Canada, and Toronto-Dominion Bank, reported solid increases in fiscal first-quarter profits on reduced loan-loss provisions as credit quality improved along with operating performance.

Strong U.S. retail salesU.S. retail sales were healthy in February, with numerous large retailers reporting solid consumer spending growth. High-end stores Saks and Nordstrom had particularly strong sales. Same-stores sales at Saks grew 15%, while Nordstrom reported a 7.3% growth in comparable-store sales. Macy’s, Kohl’s, and JCPenney also reported strong sales growth for February.

Bombardier lands two orders worth more than $14 billionBombardier announced two landmark deals this week. First, the Canadian global transportation manufacturer received its largest-ever order — worth up to $6.7 billion — for business jets from NetJets, a subsidiary of Warren Buffett’s Berkshire Hathaway. Then, Bombardier Aerospace, a subsidiary, said it had signed an $8 billion aircraft-leasing deal with the Industrial and Commercial Bank of China (ICBC) and ICBC Financial Leasing Co.

U.S. car sales accelerateGeneral Motors, Toyota, and Nissan each reported major increases in U.S. sales of cars and light trucks for February. All three benefited from buyer incentives. However, with year-over-year sales increases of 46%, 42%, and 32%, respectively, GM, Toyota, and Nissan all had reason to celebrate. Overall, the three automakers sold more than 993,000 cars and trucks in February, a 27% increase over February 2010.

The week ahead

• Japanese GDP data released Wednesday, March 9
• U.S. weekly jobless claims figures released Thursday, March 10
• France, Italy, the U.K., and China industrial production data released Thursday, March 10
• Chinese CPI data released Thursday, March 10
• Volkswagen AG earnings due Thursday, March 10
• National Semiconductor earnings due Thursday, March 10
• German CPI data released Friday, March 11

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--

MARKET WEEK: FEBRUARY 28, 2011

The Markets Despite three straight days of selling that included back-to-back triple-digit losses, the Dow managed to stay above 12,000; the S&P did the same with the 1300 mark. However, the domestic equity indexes lost anywhere from a quarter to a third of their year-to-date gains to profit-taking from the recent multi-week rally and unease about political conflict. Market/Index 2010 Close Prior Week As of 2/25 Week Change YTD Change DJIA 11577.51 12391.25 12130.45 -2.10% 4.78% NASDAQ 2652.87 2833.95 2781.05 -1.87% 4.83% S&P 500 1257.64 1343.01 1319.88 -1.72% 4.95% Russell 2000 783.65 834.82 821.95 -1.54% 4.89% Global Dow 2087.44 2241.29 2194.22 -2.10% 5.12% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 3.30% 3.59% 3.42% -17 bps 12 bps Last Week's Headlines ·         As the rebellion in Libya spiraled out of control, oil prices reached their highest level since fall 2008. ·         Home prices in the 20 cities tracked by the S&P/Case-Shiller index fell by an average of a full percent in December. Prices are now down 2.4% from the previous December, and average prices for the fourth quarter of 2010 were at roughly the same level as in the first quarter of 2003. ·         January sales of existing homes were up 2.7% from the previous month, according to the National Association of Realtors®. However, the Commerce Department said sales of new homes fell 2.4% in January compared to December. ·         The economy grew more slowly in the fourth quarter than the Commerce Department originally estimated. The 2.8% revised figure was down slightly from the original 3.2% estimate. The Bureau of Economic Analysis said higher consumer spending, exports, and residential investment were offset by a decline in nonresidential fixed investments, slower private inventory investments, and reduced federal, state, and local government spending. Eye on the Week Ahead Investors will keep a nervous eye on the conflict in Tripoli, assessing the potential impact that higher oil prices might have on the economy. Also watched will be the congressional conflict over the budget deficit as the March 4 deadline for raising the nation's debt ceiling approaches. Finally, Friday brings unemployment data. Key dates and data releases: Personal income/spending, pending home sales (2/28); U.S. manufacturing, construction spending (3/1); Federal Reserve "beige book" report (3/2); labor productivity and costs, U.S. services sector (3/3); unemployment, factory orders (3/4). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment. --see disclaimer below--

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--