Another volatile week in the stock and bond markets is likely to come. Last week we ended with the DJIA down and Mortgage Backed Securities (MBS) up, helping mortgage rates. Good economic news about the Gross Domestic Product (GDP) was overshadowed by a clear lack of consumer confidence and an uptick in jobless claims.

News from Europe and Greece was again troublesome. Greece is struggling to stay solvent, but the European Union will not step in unless the Greek government agrees to strict reduction in spending. Since there are already strikes and unrest, it is unclear what Greece will do.

The Employment report on Friday will be the most heavily scrutinized economic data released this week, and that report comes out on Friday.  Other key areas to watch include the Treasury announcement regarding its upcoming auction size; the Fed’s plan to buy MBS is due to stop at the end of this month; various economic reports on auto manufacturing, pending home sales and manufacturing.

Which way is the economy headed?  It appears to be getting better, slowly, and not without wild downward swings.  ”We think we will have this pattern of two steps forward, one step back,” said Duncan Richardson, chief equity investment officer for Eaton Vance.

Mortgage rates tend to move inversely to stocks.  Stay in close contact with your mortgage professional to capitalize on positive swings, like we saw last Friday.

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