Throughout the week, markets continued to assess the merits of the $1 trillion European bailout plan. Stocks fluctuated globally, retreating from the highs hit after the announcement of the aid package. The euro fell against the dollar to its lowest level since November 2008, as investors piled into gold. The precious metal, which is viewed as a safe haven, rose to record highs this week as Europeans worried about the value and possible breakup of their currency.
U.S. economic news
Data keep focus on U.S. recovery
The number of Americans filing claims for jobless benefits dropped for the fourth week in a row as the economy expanded and employers retain more workers. Claims fell by a more-than-expected 4,000, to 444,000, for the week ended May 8.
The number of Americans filing claims for jobless benefits dropped for the fourth week in a row as the economy expanded and employers retain more workers. Claims fell by a more-than-expected 4,000, to 444,000, for the week ended May 8.
The U.S. trade gap widened 2.5% to $40 billion in March from February. The deficit hit its highest level since December 2008 as both imports and exports surged. Also during March, exports rose 3.2% to a seasonally adjusted $147.9 billion, while imports increased 3.1% to $188.3 billion.
Retail sales rose 0.4% in April, but economists say some of the demand may have been driven by the government homebuyers' tax credit, that expired at the end of April.
U.S. global and corporate news
Senate votes to curb rating agency independence
The U.S. Senate voted to establish a government-appointed panel to decide who should rate individual asset-backed securities.Al Franken, a Democratic senator from Minnesota , proposed the amendment to the financial regulation bill. The amendment was approved by a 64 to 35 vote as some Republicans backed the move.
The U.S. Senate voted to establish a government-appointed panel to decide who should rate individual asset-backed securities.Al Franken, a Democratic senator from Minnesota , proposed the amendment to the financial regulation bill. The amendment was approved by a 64 to 35 vote as some Republicans backed the move.
Technology stocks rally
Cisco posted a 63% jump in quarterly profit. The earnings report sparked a rally among tech stocks amid evidence that a rebound in corporate technology spending is gaining momentum. International Business Machines issued an upbeat profit forecast for the coming years, and European software giant SAP announced plans to buy Sybase. Intel said sales of chips would double over the next few years.
Cisco posted a 63% jump in quarterly profit. The earnings report sparked a rally among tech stocks amid evidence that a rebound in corporate technology spending is gaining momentum. International Business Machines issued an upbeat profit forecast for the coming years, and European software giant SAP announced plans to buy Sybase. Intel said sales of chips would double over the next few years.
Disney's profit rose 55% on fewer restructuring charges and ticket sales of Alice in Wonderland, which has grossed $962 million world-wide. The outlook for the company's theme park business remained weak.
Toyota announced a surprise fiscal fourth-quarter profit and forecast a 48% earnings increase for the current fiscal year as it attempts to boost sales in Asia and cut costs. The gains come as a surprise after the company posted a net loss in the same period a year earlier. The forecast is seen as a sign that Toyota 's recall of more than 8.5 million vehicles is not likely to stunt its recovery.
Global economic news
Europe unveils aid package as Spain and Portugal pledge austerity
On Sunday the European Union unveiled an almost $1 trillion financial-aid package, including a plan to buy government and private debt, after downgrades of Greece, Spain, and Portugal made investors wary of investing in the region.
On Sunday the European Union unveiled an almost $1 trillion financial-aid package, including a plan to buy government and private debt, after downgrades of Greece, Spain, and Portugal made investors wary of investing in the region.
Days after the announcement of the bailout package Spain and Portugal announced new austerity measures to shore up investor confidence and avoid a Greek-style crisis.
The eurozone economy expanded 0.8% in the first quarter. This is the third quarter of post-recession expansion. While growth in the region still trails that of the United States , it is significant that the debt crisis gripping the eurozone has not stalled its growth.
Greek unemployment rose to 12.1% in February, from 11.3% in January. Economists in the country now worry that the new austerity measures will drive the rate even higher than forecast. The International Monetary Fund said it expects unemployment to climb to 14.6% this year before peaking at 14.8% in 2012. The European Commission has predicted that Greek unemployment will rise to 11.8% this year, from 9.5% in 2009.
U.K. Conservatives and Liberal Democrats form coalition government
After last week's inconclusive election results in the United Kingdom , Conservatives, led by David Cameron, and Liberal Democrats, under Nick Clegg, forged the country's first coalition government in 65 years. Under the coalition Cameron will be Prime Minster and Clegg the Deputy Prime Minister. Cameron's cabinet met for the first time and articulated the need for immediate action to cut Britain 's record fiscal deficit. Conservative George Osborne, named Chancellor of the Exchequer, affirmed that he will move toward fast and lasting structural reform. The cabinet agreed that ministers will be paid 5% less than they were in Gordon Brown's government and that ministerial pay will be frozen for the duration of this Parliament. That will save about £3 million over the five-year term.
After last week's inconclusive election results in the United Kingdom , Conservatives, led by David Cameron, and Liberal Democrats, under Nick Clegg, forged the country's first coalition government in 65 years. Under the coalition Cameron will be Prime Minster and Clegg the Deputy Prime Minister. Cameron's cabinet met for the first time and articulated the need for immediate action to cut Britain 's record fiscal deficit. Conservative George Osborne, named Chancellor of the Exchequer, affirmed that he will move toward fast and lasting structural reform. The cabinet agreed that ministers will be paid 5% less than they were in Gordon Brown's government and that ministerial pay will be frozen for the duration of this Parliament. That will save about £3 million over the five-year term.
China's stocks fall into bear territory
China 's Shanghai Composite Index fell into "bear" territory this week amid concern that the country's overheated economy may lead to property bubbles, an excessive tightening of monetary policy, and a damaging economic slowdown.
China 's Shanghai Composite Index fell into "bear" territory this week amid concern that the country's overheated economy may lead to property bubbles, an excessive tightening of monetary policy, and a damaging economic slowdown.
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The 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.
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