Week in Review: Global stocks climb amid rising optimism

U.S. economic news

Manufacturing activity perks up
Output at U.S. factories, mines, and utilities increased 1.2% in May, adding to a 0.7% gain in April, according to a report from the U.S. Federal Reserve Board. Industrial production had been projected to rise 0.9% in May, based on a Bloomberg News survey of economists. Rising demand from overseas markets has led companies to rebuild inventories and invest in new equipment. U.S. exports have risen in 10 of the past 12 months, according to figures from the U.S. Department of Commerce.


U.S. housing starts slide
Countering the resurgence in manufacturing activity and the implied rebound in business confidence, U.S. housing starts slumped in May. This was not surprising given the expiration of the federal government’s tax credit for first-time home buyers. U.S. housing starts fell 10% to a seasonally adjusted annual level of 593,000 in May. The National Association of Home Builders reported a drop in its confidence index in June, to 17 from 22.


U.S. consumer, producer prices stable
Inflation pressures remained tame in May according to indices that measure consumer and producer prices. In reports released by the U.S. Department of Labor this week, producer prices for finished goods fell a seasonally adjusted 0.3% in May from April, but they were 5.3% higher than a year earlier. Excluding food and energy prices, however, wholesale inflation rose by 0.2% in May. The Consumer Price Index dropped 0.2% in May, but as with producer prices, the underlying consumer prices, excluding volatile energy and food items, rose 0.1%. Consumer prices were 2.0% higher than 12 months earlier on an unadjusted basis.


U.S. jobless claims rise
Initial claims for jobless benefits in the United States rose by 12,000 to 472,000 for the week ended June 12. However, the four-week average, which smoothes volatility in the weekly numbers, fell by 500 to 463,500. The official unemployment rate remains elevated, at 9.7%.

U.S. and global corporate news

BP commits to $20 billion fund, halts dividend
Under pressure from the U.S. government, BP agreed to set aside $20 billion to clean up the massive Gulf of Mexico oil spill and to compensate victims of the environmental disaster. The oil giant also suspended its dividend to shareholders and will sell about $10 billion in assets over the next year to raise cash. In other news, BP’s credit rating was lowered to "A2" by Moody’s, following downgrades by Fitch and Standard & Poor's in recent days.


FedEx sees global recovery
Executives of FedEx said they are observing a broad-based recovery, driven by activity in Asia and not adversely affected by sluggishness in Europe. The leading U.S.-based package delivery firm, which is seen as a bellwether for economic activity, expects rising demand for its services and economic growth of more than 3% in the United States and globally for its fiscal year ending May 2011.

Global economic news

Eurozone inflation picks up
Eurozone consumer price inflation rose 0.1% in May from April and 1.6% from a year earlier, according to Eurostat, the European Union’s statistics office. Although price increases in the region rose to their highest levels in 18 months, they remain below the target of just under 2% set by the European Central Bank. Core inflation, excluding energy, food, alcohol, and tobacco, rose 0.1% on the month and 0.8% on the year.


German economic expectations slide
German economic expectations declined in June in their sharpest drop since the collapse of U.S. investment bank Lehman Brothers in October 2008. The ZEW Indicator of Economic Sentiment for Germany fell to 28.7 points in June from 45.8 points in May. However, the country’s economic outlook remains positive.


U.K. jobless claims drop
The number of people claiming jobless benefits in the United Kingdom fell more than expected in May according to the Office for National Statistics. The total number of recipients of claimant benefits fell 30,900 to 1.48 million in May, and the unemployment rate – the “claimant count rate” – declined by one-tenth of a percentage point.

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 views expressed here are those of MFS^®and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product. Individual securities mentioned are for illustrative purposes only and may not be relied upon as investment advice or as 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.


Past performance is no guarantee of future results.

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

--see disclaimer below--

Market Week: June 14, 2010

The Markets

On Monday, the Dow fell just below the lowest point reached during the May 6 flash crash. However, a strong bounce on Thursday helped give the S&P 500 its best week since early March, and the Dow once again closed above the 10,000 mark, leaving investors to wonder whether the recent downdraft is at an end or only taking a breather.

Market/Index	2009 Close	Prior Week	As of 6/11	Week Change	YTD Change
DJIA	10428.05	9931.97	10211.07	2.81%	-2.08%
NASDAQ	2269.15	2219.17	2243.60	1.10%	-1.13%
S&P 500	1115.10	1064.88	1091.60	2.51%	-2.11%
Russell 2000	625.39	633.97	649.00	2.37%	3.78%
Global Dow	1984.48	1741.90	1766.71	1.42%	-10.97%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.20%	3.24%	4 bps	-61 bps

Last Week's Headlines

• For the first time since last September, shoppers cut back on spending. According to the Commerce Department, U.S. retail sales were down 1.2% in May, though they were still 6.9% higher than a year ago.
• For a change, there was a glimmer of good news out of Europe. The European Central Bank raised slightly its estimate of eurozone growth for the rest of the year to between 0.7%-1.3%. However, though it still expects growth to pick up in 2011, the bank's current 0.2%-2.2% estimate was lower than its March forecast.
• Though credit card balances were down 12% in April, consumers borrowed an additional $1 billion. Auto, student, and personal loans were up, according to the Federal Reserve Board.
• The Commerce Department said the U.S. trade deficit rose slightly in April to $40.3 billion as exports fell and higher oil prices pushed up the cost of imports.
• Consumer sentiment rose to its highest level in more than two years. The University of Michigan/Reuters June index hit 75.5, up from its 73.6 reading in late May.

Eye on the Week Ahead

With earnings announcements largely at an end, there's little on the horizon to distract from economic data that will be dominated by housing and inflation. The simultaneous quarterly expiration of stock options, stock futures, stock index options, and stock index futures could bring volatility.

Key data releases: Treasury international capital flows, housing market index (6/15); housing starts, wholesale inflation, industrial production (6/16); consumer inflation (6/17); quadruple witching expiration (6/19).

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.

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: Volatility ensues as investors watch data and European debt response

U.S. economic news

Bernanke's assurances boost stocks
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average both got a boost midweek when U.S. Federal Reserve Board Chairman Ben S. Bernanke said the Fed would act as needed to support the economic recovery.


U.S. consumer confidence at highest level in two years
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased in June to its highest level in more than two years. Gauges reflecting consumers' perceptions of current financial conditions and their expectations for the next six months both rose. The two gauges are used to project future consumer spending.


Retail sales fall; trade deficit widens
Sales at U.S. retailers fell unexpectedly in May as purchases declined 1.2% after rising 0.6% in April. The drop was the largest since September 2009. Demand fell especially hard at building materials stores — a reflection of the end of the government appliance rebate. Also because of a drop in demand, the U.S. trade deficit widened in April to the highest level in more than a year as exports and imports both declined. The gap grew 0.6% to $40.3 billion.

U.S. and global corporate news

British government voices support for BP
The British government made its first public show of support for BP on Thursday when U.K. Chancellor of the Exchequer George Osborne cited the economic value the company brings to the people of the United States and United Kingdom. The comments came as the Obama administration stepped up the pressure on BP over its handling of the Gulf of Mexico oil spill. The estimated cost to date of the oil spill as a whole has risen to $1.43 billion.

Concern that BP would cut its dividend contributed to heavy selling of the stock Wednesday and Thursday. That selling sent the company's shares to 13-year lows. The cost of insuring BP's debt, as measured by the trade of credit default swaps, rose to levels typically charged for bonds near junk status.


FBI investigates iPad security breach
The Federal Bureau of Investigation opened an investigation into a security breach of AT&T's Web site. On Wednesday AT&T acknowledged that a flaw in its site allowed iPad users' e-mail addresses to be seen.

Global economic news

ECB extends credit to banks, keeps rates unchanged
The European Central Bank announced that it will give banks unlimited funds at a fixed rate in July, August, and September and keep buying bonds as it seeks to ease tensions in money markets and stop the euro region from breaking apart. Meanwhile the bank kept its main policy rate unchanged at 1% and raised its euro region growth forecast for 2010 to 1%, up from its previous 0.8% forecast. Still, it lowered its growth projection for 2011 down from 1.5% to 1.2% because of weaker domestic demand. The ECB also raised its inflation forecast. It now expects consumer prices to rise 1.5% in 2010 and 1.6% in 2011.


BOE keeps rates unchanged
The Bank of England kept interest rates unchanged at a record low of 0.5% in an effort to aid the economy as new Prime Minister David Cameron prepared the biggest budget cuts since the early 1980s. The bank also kept its stock of quantitative easing bond purchases at 200 billion.


New Zealand raises rates
The Reserve Bank of New Zealand raised its official cash rate a quarter of a percentage point to 2.75%. It was the first move in more than a year by the central bank after it slashed its rate 575 basis points between July 2008 and April 2009. The decision came amid an improved domestic outlook and follows a similar move last week by the Bank of Canada and a series of increases by the Reserve Bank of Australia.


China's exports jump most in six years; data show strong recovery
China's exports gained 48.5% in May from a year earlier, the biggest jump in six years. Other reports showed retail sales gained 18.7% and industrial production jumped 16.5%.


Japan's economy expands more than expected
Japan’s economy expanded more than initially estimated in the first quarter, driven by exports and an upward revision to consumer spending. Gross domestic product rose at an annualized 5% rate in the three months ended March 31. That gain is the largest since the second quarter of 2009.

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 views expressed here are those of MFS^®and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product. Individual securities mentioned are for illustrative purposes only and may not be relied upon as investment advice or as 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.


Past performance is no guarantee of future results.

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

--see disclaimer below--

Market Week: June 7, 2010

The Markets

Slip-sliding away: From the oil disaster in the Gulf to disappointing unemployment numbers to Korean tensions to Hungary's talk of sovereign default--it all combined to blow a hole out of the bottom of the stock market on Friday. After a short but hardly sweet week of vacillation, the U.S. equities indexes lost more than 3% in a single day (5% for the Russell 2000, which barely hung on to a small gain for the year). Oil prices also plummeted as a result of the economic jitters, and the euro continued its slide against the dollar.

Market/Index	2009 Close	Prior Week	As of 6/4	Week Change	YTD Change
DJIA	10428.05	10136.63	9931.97	-2.02%	-4.76%
NASDAQ	2269.15	2257.04	2219.17	-1.68%	-2.20%
S&P 500	1115.10	1089.41	1064.88	-2.25%	-4.50%
Russell 2000	625.39	661.61	633.97	-4.18%	1.37%
Global Dow	1984.48	1780.31	1741.90	-2.16%	-12.22%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.31%	3.20%	-11 bps	-65 bps

Last Week's Headlines

• Unemployment fell from 9.9% to 9.7% in May, and the economy created 431,000 jobs. Good news? Not really. It wasn't the economy but the Census Bureau that created all but 20,000 of those jobs, and those temp jobs will end over the summer. Also, according to the Census Bureau, part of the drop in unemployment resulted from 322,000 people leaving the pool of potential workers.
• U.S. manufacturing continued to expand. The Institute for Supply Management (ISM) said May was the 10th month of expansion in a row, with almost all industries reporting growth (the only area reporting contraction was petroleum/coal). The services sector also saw its fifth straight month of expansion; the ISM's index stood at 55.4%, the same level as the previous two months (a number over 50 indicates growth).
• Hungary became the latest country to rattle global investors. Government officials spent much of their weekend backtracking from statements on Friday indicating the country could be on the brink of default because of debt problems that could be twice as bad as anticipated.
• Construction spending was up 2.7% in April, according to the Census Bureau. That was reportedly the biggest monthly increase in almost 10 years, though it's still 10.5% lower than last year's April figure. Residential construction rose 4.4%, while public construction was up 2.4%.

Eye on the Week Ahead

Oil and European sovereign debt problems aren't going away as investors continue to assess the economic impact of the Gulf oil spill and banks' exposure to the threat of default.

Key data releases: Consumer credit (6/7); balance of trade, Treasury budget (6/10); retail sales (6/11).

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.

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: Stocks retreat on weaker than expected jobs data and fresh debt concerns

U.S. economic news

Payrolls rise less than expected; unemployment falls to 9.7%
Payrolls rose by 431,000 in May after a 290,000 increase in April. The gain was smaller than expected and reflected a 411,000 jump in government hiring of temporary help for the 2010 census. At the same time, the unemployment rate fell to 9.7% as Americans suspended their job searches.


Manufacturing continues rebound
U.S. manufacturing grew at a solid pace in May as export orders continued to expand rapidly. The Institute for Supply Management reported that an index of export orders within its manufacturing report rose to 62 in May, its highest level since 1988. Nonmanufacturing activity also grew in May at the same pace as it did in April. That growth is an indication that the recovery that began in the manufacturing sector has broadened.


Auto sales rise
U.S. auto sales rose for the seventh month in a row in May on the strength of big gains in most car markets.

U.S. and global corporate news

Fitch and Moody's downgrade BP
On Thursday, both Fitch Ratings and Moody's Investor Services downgraded BP's long-term credit rating one notch. The agencies warned that further downgrades are possible as the company's liability for the oil spill in the Gulf of Mexico escalated into billions of dollars and it faced a criminal investigation in the United States.

May same-store sales encouraging
May same-store sales reports were encouraging despite the still uneven nature of the U.S. economic recovery. Costco Wholesale reported that same-store sales rose 9% as net sales climbed 11%. Target's same-store sales rose 1.3% and those at Saks' rose 5.8%. Sales at teen retailers American Eagle Outfitters, Buckle, and Hot Topic all fell more than expected.


Whirlpool recalls dishwashers
Whirlpool announced a recall of 1.7 million dishwashers from its Maytag unit because of a potential fire hazard. Besides Maytag, the brands under the recall include Jenn-Air, Amana, and Crosley.


Anadarko affirms outlook; Lukoil profits double
Even though the company has suspended its deepwater drilling in the Gulf of Mexico in compliance with the U.S. government's six-month ban on drilling in the Gulf, Anadarko Petroleum affirmed its 2010 production, sales volume, and capital spending plans for the year. Russia's largest privately owned producer, OAO Lukoil Holdings, reported that its first-quarter profit more than doubled from a year ago after rising crude prices offset falling production from its western Siberian fields.

Global economic news

Credit default swaps on sovereign bonds surge
Credit default swaps on sovereign bonds surged on speculation that Europe's debt crisis is worsening after Hungary said it is in a grave economic situation after the previous government manipulated figures and lied about the state of the economy.


Bank of Canada hikes rates
Given the strength of its economy, Canada this week became the first G-7 country to raise interest rates. The Bank of Canada raised its key overnight rate by 0.25% to 0.50% but refrained from indicating that this hike was the first in a series.


Kan becomes Japanese prime minister
Naoto Kan took over as Japan's prime minister this week after lawmakers from the ruling Democratic Party of Japan elected him premier. Kan, who was finance minister in the last cabinet, said he is working on a new strategy to rein in the world's largest public debt (as a percentage of gross domestic product) and safeguard economic growth ahead of midterm elections next month.


German government agrees to block short-selling
The German government agreed to block the speculative "naked" short-selling of German stocks and eurozone sovereign bonds. Germany shocked European Union partners and markets last month when it first introduced unilateral measures.


Europe's services and manufacturing slows less than expected
Growth in Europe's service and manufacturing industries slowed at a pace that was less than initially estimated for May. The growth was welcome news as the outlook for the region's economy has dimmed in recent months with the threat of contagion from the Greek debt crisis raising concerns about the region's future.


Australian exports surge most in three decades
Australian exports, excluding farm goods, surged by the most in almost three decades in April as shipments of iron ore and coal to China pushed the trade balances to a surplus for the first time in 12 months.


Pakistan central bank head quits amid economic strain
Pakistan's central bank governor Syed Salim Raza resigned Thursday. His departure raises concerns about the nation's economic management at a time when the government is grappling with a shortage of financial resources amid rising war costs.

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 views expressed here are those of MFS^®and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product. Individual securities mentioned are for illustrative purposes only and may not be relied upon as investment advice or as 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.


Past performance is no guarantee of future results.

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

--see disclaimer below--

June Financial Newsletter

	What You Should Know about Inherited IRAs The rules governing inherited IRAs can be complicated. If you inherit an IRA from someone who isn't your spouse, your options are fairly limited. If you inherit an IRA from your spouse, you have many more options. Here are the major issues.
	More Details

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	Student Loan Repayment Options At one time, there was only one student loan repayment option--the standard 10-year plan. Now, there are an assortment of flexible repayment options to help borrowers meet their loan obligations. And it couldn't have come at a better time.
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Rolling GRATs Are Rockin' A grantor retained annuity trust (GRAT) is an irrevocable trust into which you make a one-time transfer of property and from which you receive a fixed amount annually for a specified number of years (the annuity period). At the end of the annuity period, the payments to you stop, and any property remaining in the trust passes to the persons you've named in the trust document as the remainder beneficiaries (e.g., your children) or the property can remain in trust for their benefit.

More Details

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	How have stocks performed after a recession? It's fascinating to look at how various subsegments of the stock market have behaved relative to one another. Particularly interesting is the comparison between the performance of small-cap stocks and that of large caps after each of the last six recessions. In each case, small caps led the way out of those downturns.
	More Details

	How long does it take a bear market to end? A bear market, typically defined as an overall stock market decline of at least 20%, historically has lasted an average of a little over a year. On average, bull markets tend to last almost twice as long as bear markets.
	More Details --see disclaimer below--

Health-Care Reform: High-Income Individuals Face New Medicare-Related Taxes in 2013

The recently enacted health-care reform legislation includes new Medicare-related taxes. These new taxes take effect in 2013, and target high-income individuals and families. While additional details and clarifications will become available between now and 2013, here's what you need to know.
 
New additional Medicare payroll tax

If you receive a paycheck, you probably have some familiarity with the Federal Insurance Contributions Act (FICA) employment tax; at the very least, you've probably seen the tax deducted on your paystub. The old age, survivors, and disability insurance (“OASDI”) portion of this FICA tax is equal to 6.2% of covered wages (up to $106,800 in 2010). The hospital insurance or HI portion of the tax (commonly referred to as the Medicare payroll tax) is equal to 1.45% of covered wages, and is not subject to a wage cap. FICA tax is assessed on both employers and employees (that is, an employer is subject to the 6.2% OASDI tax and the 1.45% HI tax, and each employee is subject to the 6.2% OASDI tax and the 1.45% HI tax on wages as well), with employers responsible for collecting and remitting the employees' portions of the tax.

Self-employed individuals are responsible for paying an amount equivalent to the combined employer and employee rates on net self-employment income (12.4% OASDI tax on net self-employment income up to the taxable wage base, and 2.9% HI tax on all net self-employment income), but are able to take a deduction for one-half of self-employment taxes paid.

Beginning in 2013, the new health reform legislation increases the hospital insurance (HI) tax on high-wage individuals by 0.9% (to 2.35%). Who's subject to the additional tax? If you're married and file a joint federal income tax return, the additional HI tax will apply to the extent that the combined wages of you and your spouse exceed $250,000. If you're married but file a separate return, the additional tax will apply to wages that exceed $125,000. For everyone else, the threshold is $200,000 of wages. So, in 2013, a single individual with wages of $230,000 will owe HI tax at a rate of 1.45% on the first $200,000 of wages, and HI tax at a rate of 2.35% on the remaining $30,000 of wages for the year.

Employers will be responsible for collecting and remitting the additional tax on wages that exceed $200,000. (Employers will not factor in the wages of a married employee's spouse.) You'll be responsible for the additional tax if the amount withheld from your wages is insufficient. The employer portion of the HI tax remains unchanged (at 1.45%).

If you're self-employed, the additional 0.9% tax applies to self-employment income that exceeds the dollar amounts above (reduced, though, by any wages subject to FICA tax). If you're self-employed, you won't be able to deduct any portion of the additional tax.

New Medicare contribution tax on unearned income

Beginning in 2013, a new 3.8% Medicare contribution tax will be imposed on the unearned income of high-income individuals (the new tax is also imposed on estates and trusts, although slightly different rules apply). The tax is equal to 3.8% of the lesser of:

• Your net investment income (generally, net income from interest, dividends, annuities, royalties and rents, and capital gains, as well as income from a business that is considered a passive activity or a business that trades financial instruments or commodities), or
• Your modified adjusted gross income (basically, your adjusted gross income increased by any foreign earned income exclusion) that exceeds $200,000 ($250,000 if married filing a joint federal income tax return, $125,000 if married filing a separate return).

So, effectively, you're only subject to the additional 3.8% tax if your adjusted gross income exceeds the dollar thresholds listed above. It's worth noting that interest on tax-exempt bonds, veterans' benefits, and excluded gain from the sale of a principal residence that are excluded from gross income are not considered net investment income for purposes of the additional tax. Qualified retirement plan and IRA distributions are also not considered investment income.

Together, these two new Medicare-related taxes are expected to provide a major source of revenue to finance other parts of health-care reform. The Joint Committee on Taxation projects that the combined revenue attributable to these two new taxes will exceed $210 billion over the ten-year period ending in 2019 (Source: Joint Committee on Taxation, Publication JCX-17-10, March 20, 2010).

Market Week: May 24, 2010

The Markets

If it's not one thing it's another: Between worries about eurozone problems and an increase in weekly initial jobless claims here, investors were not in a happy mood last week. Volatility reigned as the Dow and S&P 500 joined the Nasdaq in correction territory on Thursday, when they fell to within shouting distance of their lowest levels on May 6 before recuperating a bit on Friday. The Nasdaq is now down almost 12% from its late April high, while the Dow and S&P were down roughly 9% and 11% respectively. The small-cap Russell also took a hit, but its lead throughout the rally left it the only domestic index still in positive territory for 2010, while the Global Dow has lost 15% since mid-April. The dollar continued to strengthen as investors fled the euro, which at one point sank to its lowest level in four years. Oil also fell below $70 a barrel for the first time since last winter.

Market/Index	2009 Close	Prior Week	As of 5/21	Week Change	YTD Change
DJIA	10428.05	10620.16	10193.39	-4.02%	-2.25%
NASDAQ	2269.15	2346.85	2229.04	-5.02%	-1.77%
S&P 500	1115.10	1135.68	1087.69	-4.23%	-2.46%
Russell 2000	625.39	693.98	649.29	-6.44%	3.82%
Global Dow	1984.48	1852.23	1770.00	-4.44%	-10.81%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.44%	3.20%	-24 bps	-65 bps

Last Week's Headlines

• The Senate passed its version of financial regulatory reform legislation, which will have to be reconciled with the House version. The bill calls for reining in derivatives trading, putting the Federal Reserve in charge of supervising the biggest financial companies and overseeing a new consumer protection agency, setting up a body to monitor "systemic risk" in the financial system, and creating a process for liquidating a major financial institution.
• Though consumer food prices are up, falling gasoline and natural gas costs led to a 0.1% drop in overall consumer prices in April. The decline, the first since March of last year, put the annual inflation rate at 2.2%. And despite higher prices for raw materials, prices at the wholesale level also fell 0.1% (though apart from food and energy, wholesale prices were up 0.2%).
• Germany banned so-called naked short selling (selling an asset without having owned or borrowed that asset) of eurozone bonds, credit default swaps, and the stock of several large German banks through March 31, 2011, and called for adoption of the ban throughout the eurozone (naked short selling is also illegal in the U.S.). The move contributed to the continued slide of the euro despite Greece's payment of €8.5 billion of debt. European finance ministers also agreed to impose tighter restrictions on hedge funds operating there.
• The Securities and Exchange Commission (SEC) proposed halting for five minutes all trading in individual stocks whose prices move 10% or more in a five-minute period. The new circuit breaker pilot program, to be applied across all exchanges, would begin in mid-June after a period of public comment and be reviewed after December 10. The SEC also is considering modification of existing market-wide circuit breakers, which were not tripped during the May 6 chaos. The SEC's preliminary report on the "flash crash" outlined several potential causes that are being investigated, but came to no conclusion about precisely how it happened.
• Ten months after the federal government helped GM emerge from bankruptcy, the company reported its first quarterly profit since 2007. That could move the automaker one step closer to eventually issuing an initial public offering (IPO) to repay its debt to the government.
• The Mortgage Bankers Association said the pace of home foreclosures showed signs of leveling off in the first quarter. Serious delinquencies--at least 90 days overdue or in the foreclosure process--were down from the previous quarter, though the association said it was unclear whether that represented genuine improvement or a seasonal phenomenon. The percentage of loans in foreclosure was at a record high of 4.63%.
• The Conference Board's Index of Leading Economic Indicators fell for the first time in more than a year. It was down 0.1% in April, though the measure of current economic activity was up 0.3%.

Eye on the Week Ahead

As traders assess whether last week's tumble was a sign of things to come or a buying opportunity after a year-long rally, international developments will likely continue to affect trading. Economic data may suggest the extent to which the domestic recovery is surviving the global anxiety.

Key data releases: Home resales (5/24); home prices (5/25); durable goods orders, new home sales (5/26); revised gross domestic product (GDP) (5/27); personal income/spending (5/28).

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.

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.

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Week in Review: Global stock markets tumble amid worries that recovery is in question

U.S. economic news

Inflation hits 44-year low
In April, U.S. inflation slid to its lowest level in 44 years. This is the latest sign that high unemployment and excess production capacity are holding down wages and prices.

Senate approves financial overhaul
The U.S. Senate approved a sweeping overhaul of the financial services sector that would restrict the actions of banks and other financial firms. The measure must now be reconciled with the bill passed by the House of Representatives.

Weak data drive stocks lower
On Thursday stocks were dragged lower by news that U.S. jobless claims had unexpectedly increased 25,000 to 471,000 in the week ended May 15, exceeding expectations and the highest level in a month. A drop in the Conference Board's index of leading indicators added to the selloff. That index fell 0.1% after a sharp decline in building permits.

U.S. and global corporate news

Wal-Mart, Home Depot post results
Wal-Mart reported its fourth consecutive quarter of sluggish U.S. sales but still managed to post a 10% profit increase for the quarter ended April 30 amid tighter expense controls and strong international sales.

Home Depot's fiscal first-quarter earnings rose a more-than-expected 41% as improved profitability and strength in products tied to simple repairs and the outdoors helped results. The company boosted its current-year sales and earnings forecasts.

Global economic news

Germany approves share of bailout
The German lower house of parliament approved the country’s share of a $1 trillion lending package to ease Europe’s debt woes.

UK posts largest budget deficit on record
In April, the United Kingdom posted its largest monthly budget deficit since recordkeeping began in 1993. The report opens the way for what economists say will be some of the sharpest cuts in public spending in a generation. The newly appointed Chancellor of the Exchequer, George Osborne, has ordered departments to find 6 billion pounds of savings this year.

France calls for tougher rules on deficits; Japan's economy grows 1.2%
France joined Germany in calling for tougher rules to prevent large government deficits and said it would work together on measures to stabilize the eurozone.
Japan's economy grew 1.2% in the first quarter, but a sustained and full recovery still depends on continued demand for the country's exports.


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 views expressed here are those of MFS^®and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product. Individual securities mentioned are for illustrative purposes only and may not be relied upon as investment advice or as 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.

Past performance is no guarantee of future results.

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

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