Both stocks and Mortgage Backed Securities (MBS) finished the week stronger than they began. This is not typical, as they tend to move inversely to each other, but is a good indicator of the market dynamics: Two steps forward on the economy, followed by a step back. There were several days of volatile intraday swings in the MBS market, but open to close movement was not huge. The biggest news of the week came on Friday when the jobless rate was reported steady at 9.7%. Analysts were expecting a higher rate due to inclement weather in February, and stocks were the beneficiary of this news. Stocks closed up 240 points for the week. MBS closed higher for the week, but gave back much of their gains on the encouraging jobless news.

This week is light on economic data, but we will have retail sales to sift through. Investors continue to look at Europe’s reaction to Greece’s economic crisis. Greek Prime Minister, George Papandreou, will visit several foreign capitals, including Washington, to convince the world that Greece can overcome their internal civil strife. In order to get help, Greece must adhere to a strict reduction in spending, but thousands of workers are already protesting the cut backs.

We are also approaching the end of the Fed’s purchase of MBS. Once the artificial demand this has created is gone, expect MBS prices to fall some. As prices fall, the corresponding yield, or interest rate, will go up.

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