Week in Review: Stocks steady as corporate earnings continue to surprise to the upside

U.S. economic news

Beige book shows modest recovery
The U.S. Federal Reserve Board's "beige book" showed a modest pace for economic recovery. The report failed to quell speculation that policymakers will increase asset purchases to spur inflation and employment. Eight Federal Reserve banks reported some form of growth, according to the beige book survey, which is released two weeks before meetings of central bank policymakers.


Jobless claims fall
Initial unemployment claims fell 23,000 to 452,000 in the week ended October 16. While lower, the claims remain at a level that indicates businesses are doing little hiring.


Mortgage applications drop
The number of mortgage applications in the United States dropped by the most in four months. The drop was led by an 11% decline in refinancing, which fell as mortgage rates rose.

U.S. and global corporate news

Of the 129 companies in the Standard & Poor's 500 Stock Index that have reported results since October 7, 111 beat analysts' per-share earnings estimates, according to data compiled by Bloomberg. Analysts surveyed by Bloomberg predict 24% growth in third-quarter profits from a year earlier for S&P 500 companies.


Morgan Stanley's, Goldman Sachs' profits drop; Wells Fargo beats estimates
Morgan Stanley's third-quarter earnings fell 67% from a year earlier as a steep drop in trading volumes weighed on results at Wall Street's second-largest investment bank. Revenue in the firm's international securities unit dropped 42% from a year earlier.


Goldman Sachs Group reported its third-quarter net income fell 40% from a year earlier, and net revenue declinded 28%, hurt mostly by a steep downturn in fixed-income and stock trading.


Wells Fargo reported record third-quarter profits that beat most analysts' estimates as credit conditions improved. Results included a 13% increase from its community banking division.

Global economic news

China raises rates
To combat inflation, China unexpectedly raised interest rates for the first time since 2007 . China's move is part of an effort to dry up some of the liquidity made available to combat global recession.


U.K. government details spending cuts
The British government detailed sweeping spending cuts that are intended to help the country reduce its £155 billion budget deficit. Treasury chief George Osborne this week unveiled £81 billion in cuts over four years. It is hoped that by weaning the United Kingdom off robust public spending, lending costs can be kept low, giving a boost to the private sector.


German business confidence rises
German business confidence rose unexpectedly in October to the highest level in three and a half years. The positive sentiment suggests that growth may not slow as much as some economists had forecast. The Munich-based Ifo Institute said its business climate rose to 107.6 from 106.8 in September.

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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on 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; boston.com.

Considerations in Claiming Social Security Retirement Benefits

Week in Review: Currency tensions increase as dollar hits fresh lows

U.S. economic news

Economy sheds more jobs than expected
The U.S. economy shed more jobs than expected in September as government payrolls declined by 159,000. Overall, employers cut staffing by 95,000 workers, a jump from the 75,000 workers let go in August. Private payrolls that exclude government agencies climbed 64,000, a lower number than forecast. The unemployment rate remained at 9.6%. The average work week held at 34.2 hours.


U.S. data show mixed recovery
Other data released this week showed a U.S. economy still on the course of an uneven recovery. Factory orders dropped more than expected in August. The decline was the third in the past four months. Commercial airplanes drove the decease; excluding transportation, all other factory orders rose. There were, however, positives in the report. A barometer of capital spending increased, and non-defense capital goods orders, excluding airplanes, rose by 5.1%. Meanwhile, the U.S. service sector expanded in September, allaying some of the fears that the economy could slip back into recession as manufacturing cools. An index based on a survey of U.S. purchasing managers at nonmanufacturing firms rose to 53.2 in September, from 51.5 in August, the Institute for Supply Management reported. Service sector firms account for two-thirds of the economy and employ four of every five private sector workers in the United States.

Also this week, the National Association of Realtors Pending Home Sales Index increased 4.3% to 82.3 for August. Year over year the index was 20.1% below its level of 103 in August 2009, and consumer credit fell $3.3 billion in August from July to $2.414 trillion, the lowest level since early 2007. The decline was driven by a $5 billion drop in credit-card and other revolving credit to $822.2 billion. Car loans and other non-revolving credit rose $1.7 billion to $1.592 trillion.

U.S. and global corporate news

Alcoa kicks off earnings season with 21% drop in profits
Alcoa's profit fell 21% on higher operating expenses, even as sales benefited from higher prices and rising world demand for metals. Alcoa was the first Dow Jones Industrial Average company to report third-quarter results.


American, British Air, and Iberia launch trans-Atlantic venture
In an effort to compete with rivals and defend market share, American Airlines, British Airways, and Spain's Iberia Airlines forged a trans-Atlantic joint venture. International joint ventures have picked up as many countries keep foreign ownership limits on airlines and three major global alliances - Star Alliance, SkyTeam, and Oneworld - battle for the upper hand on cross-continental routes.


Renault sells 14.9% stake in Volvo
Renault, the second-largest car maker in France, sold a 14.9% stake in Volvo.

Global economic news

IMF reports stronger-than-expected growth for the first half of the year
The International Monetary Fund reported this week that growth in the first half of the year has turned out slightly stronger than it had expected with the global economy expanding at an annualized 5.25% rate.


ECB and BOE keep rates unchanged
The European Central Bank and Bank of England both held interest rates unchanged this week. Speaking before the meeting of the Group of Seven this week, ECB President Jean-Claude Trichet said he opposes disorderly currency moves as concerns about "currency wars" mount. Worries about such wars have risen as countries around the world take measures to devalue currencies and loosen monetary policy to safeguard export-led growth.


German exports fall for second month in a row
German exports fell in August for the second month as a strengthening euro and slowing global growth curbed demand. The decline comes after exports helped growth in Europe's largest economy accelerate in the second quarter at the fastest pace in two decades.

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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on 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; boston.com.

--see disclaimer below--

Week in Review: DJIA posts best September since 1939 despite uneven economic recovery

U.S. economic news

U.S. manufacturing sector expands in September
The Institute for Supply Management said its purchasing managers' index expanded in September for the 14^th consecutive month. The reading rose to 54.4%. The overall picture, however, was less encouraging.The U.S. new orders measure fell to 51.1 from 53.1, and the production index dropped to 56.5 from 59.9. The employment gauge fell to 56.5, the lowest in six months, and the ISM's the index of export orders dropped to 54.5, the lowest level this year.

U.S. consumers spend more for second month in row
The U.S. Department of Commerce said U.S. consumer spending rose 0.4% in August after rising the same amount in July. Incomes increased 0.5% in August after a 0.2% rise in July.

Consumer confidence dips
Consumer confidence fell in September amid mounting gloom over the outlook for jobs and wages, according to the Conference Board's Consumer Confidence Index, which declined to 48.5, the weakest level since February.

Business spending on the rise
Business spending on buildings and machinery has risen since the end of the recession. An index of capital expenditures moved up 6.5 points to 93 in the third quarter, according to the Business Roundtable's quarterly CEO Economic Outlook survey of chief executives of big companies, Any number over 50 indicates expansion. After the index hit a low of -6.7 last year, firms tapped into their stockpiles of cash for business investment instead of for hiring.

Home prices rise at a slower pace
Home prices in 20 cities rose at a slower pace in July from a year earlier, according to the Standard & Poor's/Case-Shiller Home Price Indices. The group's index of property values increased 3.2% from July 2009. Ten of the 20 cities showed a year-over-year increase in prices, led by an 11% gain in San Francisco.

U.S. and global corporate news

U.S. government to sell stake in AIG
The U.S. government will sell its stake in American International Group under a plan that could end its controversial bailout sooner than many expected. The plan would involve the U.S. Department of the Treasury selling at least $50 billion of shares to private investors over months or years. While the government has recouped and even made money on its investments in many of the nation's biggest banks, AIG has been one of the biggest contributors to the government's expected loss on the Troubled Asset Relief Program (TARP.) More than $120 billion in taxpayers' support provided to AIG remains outstanding, of which $49 billion came from the TARP program. Analysts have cautioned that the sale of AIG shares could prove difficult and that a smooth and swift exit from the giant insurer was far from certain.


Prudential Financial to buy two AIG units
Meanwhile, Prudential Financial Group has agreed to buy two life insurance units from AIG for $4.8 billion in order to expand its presence in Japan. Prudential will pay $4.2 billion in cash and take on $600 million in debt and will pay for the acquisition in part through a $1.3 billion stock sale and $1.2 billion in senior notes.

Sinopec to invest $7.1 billion in Repsol
China Petroleum and Chemical, (also known as Sinopec) which is China's second-largest oil and gas producer, will invest $7.1 billion in Repsol YPF's Brazilian unit as the Spanish oil company raises funds to develop offshore projects. The acquisition is the second-largest overseas purchase by a Chinese company, taking place as the world's largest energy consumer attempts to satisfy internal demand.

Global economic news

Ireland moves to avert bailout
Ireland vowed to pump billions more euros into its hardest-hit lenders in an effort to persuade investors it would not need a European Union bailout.

Chinese manufacturing growth picks up
Growth in Chinese manufacturing picked up in September, adding to evidence that China's economic recovery remains on track. The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers' index, or PMI, rose to 53.8 in September, from 51.7 in August. A number above 50 shows manufacturing activity is expanding. The index has remained above 50 for 19 straight months, after slowing in late 2008 and early 2009. September's index reflected the highest level since it hit 53.9 in May.

Tankan shows Japanese manufacturers turned more pessimistic
Japanese manufacturers turned more pessimistic in their outlook for the rest of the year because of the yen's appreciation and increased uncertainty over the global economy, according to the Bank of Japan's quarterly business sentiment survey, known as the tankan.

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 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 MFSmfs.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; boston.com.

--see disclaimer below--

October Newsletter

Medicare Annual Enrollment Season Is Here The annual enrollment period for Medicare runs from November 15 through December 31. During this period, you can make changes to your Medicare coverage that will be effective on January 1, 2011. Even if you like the Medicare coverage you already have, it's a good time to explore your options, especially if your health or financial circumstances have changed. More Details

They're Baaack: RMDs for 2010 In response to deteriorating economic conditions in 2008, Congress waived required minimum distributions (RMDs) from IRAs and defined contribution employer plans for the 2009 calendar year. This allowed individuals to avoid having to deplete retirement plan assets while the value of those assets was suddenly depressed. But RMDs are back for 2010. Here's how the rules apply. More Details

Year-End Investment Planning Is More Challenging in 2010 Significant changes in the tax code scheduled to go into effect in 2011 could substantially alter the taxation of your portfolio. That could in turn affect whether your current investments will still be appropriate in the future. More Details

What does a stronger dollar mean for my portfolio? A stronger dollar can have a profound impact on the value of your portfolio, even if you don't think you own any international investments. More Details Why should I care about Europe's debt problems? How is it possible for the debt of such a relatively small country as Greece to have such a profound impact on investments in a 401(k) plan a continent away? More Details --see disclaimer below--

Week in Review: U.S. stocks rise on positive economic news

U.S. economic news

Home sales, home starts rise
A couple of positive reports on the U.S. housing market were released this week. The U.S. Department of Commerce reported that U.S. housing starts rose 10.5% in August to a seasonally adjusted 598,000 annual rate. This unexpectedly positive news was followed by a report from the National Association of Realtors that August home sales rose 7.6% from the previous month to 4.13 million on a seasonally adjusted annual basis. However, the price of U.S. homes fell 0.5%, according to the Federal Housing Finance Agency.

Fed says it could take future action
Although the Federal Reserve made no changes to its key short-term interest rate and took no other immediate steps, it said in a statement that it “is prepared to provide additional accommodation if needed to support the economic recovery,” and it expressed concern about inflation being too low.

Consumer Price Index flat
The U.S. core Consumer Price Index, excluding energy and food, was flat from July to August, according to the U.S. Department of Labor. The overall CPI rose 0.3%. Year over year, the CPI rose 1.1%, with the core CPI up 0.9% in August from a year earlier. Because sluggish domestic demand is likely to keep inflation tame, many analysts expect the Fed to make large-scale asset purchases in the coming months.

Weekly jobless number rises
Initial unemployment claims rose by 12,000 to 465,000 in the week ended September 18, the U.S. Department of Labor said, but the four-week moving average fell by 3,250 to 463,250, reinforcing a longer-term positive trend.

Economic indicators lead upwards
The Conference Board’s index of leading economic indicators rose slightly, but more than expected in August. This suggests a continued weak economic recovery, but eases immediate concerns of a double-dip recession.

Corporate debt defaults down
The default rate for U.S. corporate debt is expected to drop below 3% by the end of 2010, according to Moody’s Investors Service. This is a sharp drop from a peak of 14.6% in November 2009 and below the default rate of 3.1% from August 2008, a month before the financial crisis began.

Demand for capital goods rises
Although durable goods orders declined overall by 1.3% in August, orders for non-defense capital goods, excluding aircraft – a gauge of capital spending by businesses – increased by 4.1%. A sharp drop in demand for airplanes and cars was balanced by rising demand for machinery, computers, and fabricated metal products.

U.S. and global corporate news

Brazil’s Petrobras offers record share sale
Petroleo Brasileiro (Petrobras), Brazil’s federal oil company, introduced a share offer of $70 billion, which was snapped up, with the Brazilian government buying $43 billion and the market purchasing the remaining shares. Strong demand allowed Petrobras to sell the shares almost at par with Thursday’s closing price. The proceeds will go to develop recently discovered large offshore oil fields. Petrobras expects to double its oil output by 2014, making Brazil the world’s fifth-largest oil producer, according to The Wall Street Journal.

Nike’s profit rises 9%
Shoe and athletic apparel manufacturer Nike announced a 9% growth in its quarterly profit on higher demand for its athletic apparel and less costly discounting. The company says its revenue has rebounded in the last three quarters, following lagging demand during the recession.

Darden announces higher sales
Darden Restaurants, the casual-dining giant that owns Olive Garden, LongHorn Steakhouse, and Red Lobster, posted a 20% rise in first-quarter earnings. Although same-store sales fell 1.7% at Red Lobster, they rose more than 2% at Olive Garden and LongHorn in a positive sign for the casual-dining industry.

General Mills has healthy earnings
General Mills’ earnings rose 12% on higher sales of certain cereal brands and changes in the value of some commodity hedges. Profit was somewhat diminished by higher raw-material costs.

Global economic news

Eurozone growth slows
Private sector output growth in the eurozone slumped to a seven-month low in September and is expected to slow more in the fourth quarter, according to a survey by financial-information company Markit. The firm's monthly measure of private-sector activity fell to 53.8 in September from 56.2 in August. However, any number above 50 indicates growth. Meanwhile, new industrial orders in the eurozone posted their sharpest monthly drop in a year and a half in July. Factory orders fell 2.4% from June but rose 11.2% above year-earlier numbers.

German business confidence rises
German business confidence rose surprisingly in September, according to the German research institute Ifo. Its closely watched German business sentiment index rose to 106.8 in September from 106.7 in August, beating expectations of a slight drop.

Irish GDP stumbles
Just after Ireland recovered from its recession in the first quarter of 2010, its Central Statistics Office announced this week that its second-quarter gross domestic product unexpectedly fell 1.2%. Ireland was the first country in the eurozone to slide into recession and was one of the most troubled economies in the area last year.

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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on 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; boston.com.

--see disclaimer below--

Week in Review: Investors cautious, economic concerns ease somewhat

U.S. economic news

Trade deficit narrows in July
The nation’s trade deficit fell 14% in July to $42.8 billion from $49.8 billion in June, according to a report from the U.S. Department of Commerce. The figure is well below the $47.3 billion gap that had been forecast by economists. Led by aircraft and capital goods, exports reached a record $153.3 billion in July, up 2% from June and 18% from one year earlier. Imports fell 2% from June to $196.1 billion. A smaller trade deficit is potentially good news for the economy because it suggests trade will have less negative impact on growth in the third quarter than it had in the second quarter.

Credit card debt plummets
According to the U.S. Federal Reserve Board, revolving credit outstanding (almost entirely credit card debt) fell $4.4 billion to $827.8 billion in July from June. That figure represents a decline of 15% from the peak of $973.6 billion reached in August 2008.

Unexpected gas glut
Gasoline stockpiles increased by a record 5% during July and August. Supplies typically fall 6% in these two months. One benefit to gas buyers from the unexpected surplus: prices at the pump have remained largely the same during the summer months. The extreme gains in gasoline supplies are a result of record refinery output and high imports more than making up for robust consumption.

Fed’s Beige Book reports uneven growth and signs of deceleration
The Fed reported in its Beige Book survey of economic conditions in the central bank’s 12 districts that recovery is occurring unevenly across the country. The report stated that regions dependent on manufacturing and farming were making the most progress while those reliant on housing were struggling. The report also said that while the U.S. economy maintained its expansion overall, five Fed districts have experienced “mixed conditions or a deceleration in overall economic activity” in mid-July through the end of August. The other seven regions all reported modest growth or conditions that were improving.

New unemployment claims fall
The U.S. Department of Labor reported that applications for unemployment benefits fell by 27,000 to 451,000 in the week ended September 4. Economists had predicted a much smaller drop of just 2,000 claims. While total initial jobless claims are still much higher than they would be in a healthy economy, they are now at their lowest level since July 10.

U.S. and global corporate news

Bristol-Myers Squibb announced that it is acquiring biotechnology company ZymoGenetics for $735 million. The deal is the latest in a series of small-to-midsize acquisitions and partnerships that Bristol has made over the past few years in an attempt to strengthen its product lineup.

British Airways and American Airlines, which won approval for their joint venture in July, will start their alliance on flights across the Atlantic in October. The two airlines will align their frequent-flier programs, allowing travelers to earn and use their miles on both airlines.

Talbots reported a profit of $941,000 for the quarter ended July 31, a considerable turnaround from a prior-year loss of $24.5 million. The women’s clothing and accessories retailer cited lower costs and resistance to markdowns as reasons for its improved earnings. Despite posting a profit, net sales decreased 1.3% to $300.7 million and same-store sales fell 1.4%, following a 25% drop in same-store sales one year earlier.

McDonald’s said same-store sales rose 4.9% in August from a year earlier, narrowly falling short of analyst estimates. Analysts projected global sales would increase 5%. The world’s largest restaurant chain reported that sales increased 4.6% in the United States, thanks in part to the popularity of its higher-margin smoothies and frappes.

Global economic news

OECD predicts slowdown in global economy
The Paris-based Organization for Economic Cooperation and Development projected that the pace of global economic expansion during the second half of 2010 will be slower than previously estimated. In its short-term forecast for the Group of Seven leading industrial nations, the think tank said annualized growth in G-7 gross domestic product will slow to 1.4% in the third quarter and 1% in the fourth quarter. That comes on the heels of growth of 3.2% and 2.5% in the first and second quarters of the year, respectively. Saying there is great uncertainty surrounding the world economy in the months ahead, the OECD added that central banks around the world may need to be prepared to provide additional economic stimulus.

Bank of Canada lifts benchmark rate
Canada’s central bank increased its benchmark interest rate for the third time this year, raising its target rate for overnight loans between commercial banks to 1% from 0.75%. Canada’s increases are the first among Group of Seven countries following last year’s global recession. The country seems to be recovering from the global economic downturn faster than most countries, as Canada has already returned to pre-recession employment levels. In addition, “consumption and investment have ‘evolved’ as anticipated and are expected to remain buoyant,” the Bank of Canada said.

Ireland’s state-owned bank to be split
Ireland’s troubled banking system became the latest victim in Europe’s continuing economic crisis, as the government said it would break up the weakest of its major banks to try to prevent a run by depositors. Anglo Irish Bank, which was nationalized by Ireland’s government last year, will likely be divided into a government-backed bank that would hold customer deposits and an “asset recovery” bank that would hold the bank’s increasingly bad loans. The intention is that eventually the recovery bank’s assets will be sold off in whole or in part. The move is being made as Ireland attempts to restore the reputation of its financial system.

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 adviser, 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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on 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; boston.com.

--see disclaimer below--

Market Week: For Week Ending 9-3

The Markets

So far, so good: September opened with a powerful rally on Wednesday that sent domestic equities up roughly 3%, and Friday's sequel wasn't bad either. The S&P rose above 1,100 once again--it has now recaptured just over 40% of what it's lost since its 2010 high on April 23--and the Dow and Russell 2000 once again turned positive for the year.

Market/Index	2009 Close	Prior Week	As of 9/3	Week Change	YTD Change
DJIA	10428.05	10150.65	10447.93	2.93%	.19%
NASDAQ	2269.15	2153.63	2233.75	3.72%	-1.56%
S&P 500	1115.10	1064.59	1104.51	3.75%	-.95%
Russell 2000	625.39	616.76	643.36	4.31%	2.87%
Global Dow	1984.48	1793.44	1860.16	3.72%	-6.26%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	2.66%	2.72%	6 bps	-113 bps

Last Week's Headlines

• Continued unwinding of temporary census jobs helped push unemployment up slightly in July, to 9.6%, according to the Bureau of Labor Statistics. However, nonfarm payrolls declined less than expected and a separate survey of corporate payrolls showed a gain of 67,000 jobs.
• The Bureau of Economic Analysis said Americans' incomes were up 0.2% in July from the month before as companies continued to increase hours for existing workers rather than hire new ones.
• U.S. manufacturing expanded in August, according to the Institute for Supply Management (ISM), rising from 55.5 to 56.3 (any number over 50 indicates growth). The U.S. services sector also expanded in August for the eighth month in a row, the ISM said. However, the rate of growth was almost 3 percentage points lower than in July, and new orders dropped even more.
• Pending home sales rebounded in July after a sharp drop following the April deadline for qualifying for the federal tax credit. According to the National Association of Realtors®, the index rose 5.2% to 79.4, compared to the 2.8% decline of the previous month.
• High levels of cash held by many corporations are helping to spur mergers and acquisitions. HP won a bidding war with Dell over computer storage company 3Par, and Burger King agreed to be acquired by private equity company 3G Capital.

Eye on the Week Ahead

In a trading week that's both short and light on data, weekly initial unemployment claims data could receive extra attention in light of last week's August figures. The Federal Reserve's "beige book" report will provide anecdotal evidence of the state of the economy.
Key data releases: Fed "beige book" report, consumer credit (9/8); international trade (9/9).
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--

U.S. economic news

Job losses moderate
Job losses continued to rise in August but at a more modest pace than expected. Nonfarm payrolls fell by 54,000 last month, matching the level of losses recorded in July. Private employers added 42,000 jobs in August, while a reduction in census workers dragged total payrolls down by 100,000 and pushed the unemployment rate up to 9.6%. Earlier in the week, reports showed that initial jobless claims fell by 6,000; that level indicates that the labor market has not improved this year even as the economy expanded.

Manufacturing gains add to enthusiasm
The Institute for Supply Management said its manufacturing index rose to 56.3 in August from 55.5 the prior month. Faster growth in production, employment, and inventories pushed the U.S. manufacturing index higher last month.

Unexpected jump in pending home sales
Pending home sales unexpectedly grew 5.2% in July. The jump was seen as a sign that the market may be starting to stabilize after the expiration of a homebuyer tax credit.

U.S. and global corporate news

Canadian banks miss expectations
The Bank of Nova Scotia's third-quarter earnings rose 14% as the internationally diverse bank posted a record quarter in its domestic banking business. Still, its results missed analysts' expectations. Toronto-Dominion Bank also missed analysts' expectations, despite a 29% jump in profit. That increase was powered by strong retail results in Canada and the United States and lower loan-loss provisions.

Heinz profits rise 13%
H.J. Heinz's fiscal first-quarter earnings rose 13%, helped by strong sales of ketchup and staples such as Classico pasta sauces. During a conference call to announce its results, the Pittsburgh-based company again signaled its interest in making acquisitions in emerging markets.

Global economic news

ECB extends emergency lending measures
European Central Bank President Jean-Claude Trichet extended emergency lending measures for banks into 2011 as the risk of a renewed U.S. recession put the eurozone's rebound in crisis. The ECB said it will keep offering banks unlimited one-week and one-month loans at least until January 18. The ECB will also offer banks three-month loans in October, November, and December at interest rates linked to the ECB's average benchmark rate over the maturity of the loan.

Japan expands lending program and announces $10.8 billion stimulus
In an effort to combat the rising yen, which analysts have blamed for slower export growth and a sputtering economy, the Bank of Japan announced that it would expand its lending program and that the government would implement a $10.8 billion stimulus package.

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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on 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; boston.com.

--see disclaimer below--

Week in Review: Stocks under pressure amid signs that recovery is losing momentum

U.S. economic news

Bernanke pledges Fed to do all it can to ensure recovery
U.S. Federal Reserve Board Chairman Ben Bernanke said Friday that the U.S. central bank "will do all that it can" to ensure economic recovery continues. He outlined steps the Fed might take if the economy slows. In his opening remarks to the world's central bankers in Jackson Hole, Wyoming, Bernanke said the Fed is prepared to provide additional monetary accommodation through unconventional measures if necessary.

GDP grows more slowly than thought
The U.S. economy grew more slowly that initially estimated in the second quarter and corporate profits nearly dried up. Gross Domestic Product rose from April through June at an annualized seasonally adjusted rate of 1.6%. A month ago, the government estimated the rate at 2.4% after a 3.7% expansion in the first quarter. After-tax earnings rose 0.1%, off the previous quarter's 11.4% gain.

Weak durable goods orders, drop in home sales show recovery losing pace
Weakness in durable goods orders and a drop to historic lows in new-home sales offered more signs that the economy is losing momentum. Durable goods orders rose 0.3% in July from June, mostly on the back of an increase in aircraft orders. Excluding the volatile transportation sector, orders tumbled 3.8%.

Also this week, reports showed that sales of new single-family homes fell 12.4% in July from June to a seasonally adjusted rate of 276,000, the lowest level since the data series began in 1963. Many purchasers seem to have left the markets since the expiration on April 30 of a federal tax credit for homebuyers. Existing home sales suffered a similar decline, dropping a record 27.2% to their lowest level in 15 years, as inventories soared to their highest level in more than a decade. Adding to the discouraging news were reports by the Federal Reserve Bank of Kansas City that manufacturing activity in the district stalled.

Initial jobless claims decline more than expected
More encouragingly, initial jobless claims declined by 31,000 to 473,000, more than the 10,000 drop predicted by economists. However, new claims for the previous week were revised upward, and the four-week moving average rose to the highest level since November 2009.

U.S. and global corporate news

Toyota Motor announced it will recall about 1.13 million Corolla and Matrix cars for an engine defect that U.S. regulators said could cause stalling. The recall will affect model years 2005 to 2008 in the United States and Canada and comes after three reported accidents linked to the defect. GM will recall approximately 200,000 of the Pontiac Vibe, which was designed and engineered by Toyota and built alongside the Matrix at a joint manufacturing plant in California.

Johnson & Johnson pulled two hip-repair implants off the market because of quality problems. That recall, administered through J&J's DePuy Orthopaedics unit, came the same week that J&J's Vision Care unit withdrew about 100,000 boxes of contact lenses sold in Asia and Europe because of a manufacturing problem.

Spirits giant Diageo reported its net profit rose 1.5% for the year ended June 30. Sales increased 5% but were up only 2% when stripping out the effects of currency fluctuations, acquisitions, and disposals. During the fiscal year, Diageo benefited from an 11% jump in organic net sales in emerging markets, including China and India, but suffered a 2% sales decline in the developed world.

Global economic news

U.K. economy expands 1.2%
The U.K. economy expanded 1.2% in the second quarter, marking its biggest growth spurt since 2001, as companies rebuilt inventories and construction work surged.

Standard & Poor's downgrades Ireland; Fitch upgrades Rwanda
Standard & Poor's Ratings Services cut its long-term sovereign credit rating on Ireland one notch to AA-. The company said the projected fiscal cost to the Irish government of supporting the financial sector has increased significantly above prior estimates. Ireland's banks were hit by the property market crash; as a result, the Irish government was forced to pump billions of euros into the banks.

Meanwhile, Fitch Ratings upgraded Rwanda, citing the African nation's "strong growth" and an improvement in its business environment. It noted that the country has posted an "uninterrupted" period of strong economic growth that has more than doubled its per capita income since 1994, when genocide killed some 800,000 people. The rating was upgraded to B, five steps below investment grade.

Japan's exports rise, albeit at a slower rate
Japan's exports rose in July for the eighth month in a row as sales of products, such as cars and electronic components, in emerging markets were still solid. However, the rate of growth slowed for the fifth month in a row. That pace is expected to slow even more if the yen, which this week surged to a 15-year high against the dollar, continues to appreciate.


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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on 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; boston.com

--see disclaimer below--

Week in Review: Economic weakness weighs on markets

U.S. economic news

U.S. weekly jobless claims reach 500,000
Initial unemployment claims rose unexpectedly again, hitting 500,000 for the week ended August 14. Claims increased by 12,000, though economists surveyed by Dow Jones Newswires had predicted a decline of 4,000. The four-week moving average rose by 8,000 to 482,500. The weekly jobless claims number and the four-week average reached their highest levels since late in 2009. As previously reported, the economy lost 131,000 jobs in July. Together, these reports signal a struggling economic recovery.


Philadelphia-area manufacturing index weakens
The Federal Reserve Bank of Philadelphia’s general economic index turned negative in August, signaling an economic contraction for the first time since July 2009. The widely watched survey fell to minus 7.7 from plus 5.1 in early July. Economists surveyed by Bloomberg News had forecast a rise to plus 7.


Industrial production up slightly
U.S. industrial production rose 1% from June to July, the U.S. Federal Reserve Board reported. This was slightly better than expected.


Producer prices perk up, deflation fears ease
The U.S. Department of Labor’s Producer Price Index increased 0.2% in July after a drop of 0.5% in June. It was the index’s first rise in three months and helped ease growing concerns about deflation.

U.S. and global corporate news

BHP Billiton aims to take over Potash Corp.
Australian mining powerhouse BHP Billiton said it would ask Saskatchewan-based Potash Corp.’s shareholders directly to approve its $38.6 billion all-cash takeover bid after the fertilizer company’s board rejected the offer. The proposed acquisition needs approval from at least 50% of Potash shareholders.


Intel to acquire McAfee
Computer maker Intel agreed to pay $7.7 billion to buy computer-security software maker McAfee in the latest in a series of technology company acquisitions as profitable companies take advantage of low valuations to make bargain purchases.


GM files for an IPO
General Motors filed for a public stock offering that would allow the federal government to begin selling its 61% stake in the automaker and help GM raise money for its turnaround. GM’s interim CEO, Edward E. Whitacre, Jr., who oversaw the automaker’s dramatic return to profitability this year, will step down as chief executive September 1 and as chairman at year end. Last week, GM announced a second-quarter profit of $1.3 billion, its strongest quarter in six years.


Tech bellwethers post profits
Hewlett-Packard and Dell both reported improved profits for the quarter just ended, signaling strength in the technology sector. HP posted a 6% increase in profits on an 11% rise in revenue. Rival computer maker Dell’s profit rose 15% and its revenues were 22% higher than a year earlier.


Deere’s profit leaps
Deere & Company, the world’s largest manufacturer of farm machinery, announced a 47% jump in quarterly earnings as sales of large farm machinery and construction equipment rebounded. U.S. sales rose because of robust commodity prices, strong cash receipts from farming, and low interest rates. However, European demand continued to be weak.


Wal-Mart earnings up on non-U.S. results
Wal-Mart Stores posted a 3.6% increase in second-quarter earnings, with strong international results leading the way. The discount retail chain’s international sales and operating income had double-digit growth. However, its U.S. same-store sales fell for the fifth straight quarter.


Williams-Sonoma earnings soar
Williams-Sonoma, a retailer of housewares and home decor, posted a $30.8 billion profit for its quarter ended July 31, compared with just $399,000 during the same period a year ago. Excluding restructuring and other charges, the company grew its earnings six-fold. Revenue rose 15% and same-store sales grew 14%.

Global economic news

China passes Japan as world’s second-largest economy
In the latest reminder of China’s growing clout and Japan’s decline as an economic giant, China replaced Japan as the world’s second-largest economy in the second quarter. China’s economic output was valued at $1.33 trillion in the second quarter while Japan’s economy stood at $1.28 trillion. Japan has had the world’s second-largest economy for most of the last four decades. In comparison, U.S. second-quarter gross domestic product was $14.6 trillion, according to the U.S. Department of Commerce.


German central bank raises economic forecast
The Deutsche Bundesbank raised its 2010 forecast for German economic growth to 3% from 1.9% after second-quarter figures released last week showed surprising strength. The country's economy grew at its fastest pace in 20 years, fueled by robust growth in exports.


Japan’s GDP slows to a crawl
Japan’s economy grew at an anemic 0.4% in the second quarter, falling far below expectations because of stagnant consumption and weak exports. Strength in the yen is weighing down demand for Japanese exports.


Taiwan economy grows
Taiwan’s economy grew at a robust 12.53% in the second quarter, much faster than the median forecast of 10.5% in a Dow Jones Newswires poll, prompting the Taiwanese government to raise its full-year GDP growth forecast to 8.24% for 2010, from 6.14%.


Inflation climbs in eurozone, eases in India
An increase in eurozone inflation and a decrease in the rate of rising prices in India could both be considered good news. Higher energy prices in Europe caused the eurozone annual inflation rate to rise to 1.7%, its highest annual rate since November 2008, but still below the European Central Bank’s target of 2.0%. In India, wholesale inflation tapered to 9.97% in July from 10.55% in June.

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 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. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on mfs.com.
Please check with your compliance deptartment before distributing to clients.

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--