On Monday, the government announced that it will use up to $250 billion of the $700 billion rescue fund to make equity investments in a wide range of financial institutions. Their purpose is to inject capital into the banking system and encourage lending. Many other countries have taken a similar step. This, along with the other government actions, seems to have increased investor confidence in the banking system, and conditions in the credit markets showed signs of improvement during the week. Equity markets were extremely volatile this week, and the stock market ended with moderate gains. Mortgage rates moved in a very wide range during the week as well, but finished the week nearly unchanged.

In a speech Wednesday, Fed Chief Bernanke suggested that the key tools to "confront and solve" market problems are now in place. He emphasized, though, that financial markets and the economy may take months to recover. Many investors had expected that the rescue plan and other government actions would have a larger immediate impact. Now the general outlook is for economic growth to remain weaker than normal until at least the middle of 2009. Bernanke added that he expects the inflation rate to decline due to a slowing economy and lower energy prices, which would be good news for future mortgage rates.

Existing Home Sales will be released on Friday.