SAN FRANCISCO (MarketWatch) -- Mortgage-backed securities rallied Tuesday, sending yields sharply lower, which indicates mortgage rates are likely to fall further. Yields on securities of pooled mortgages backed by Fannie Mae fell 30 basis points Tuesday from Monday's close, following a 17 basis-point decline Monday, said Miller Tabak & Co. bond strategist Tony Crescenzi. These yields correlate strongly with Freddie Mac's weekly survey of home loan rates. From an average 5.1% last week, the average mortgage rate "is probably moving toward 4.75% or lower," wrote Crescenzi in emailed comments. The tumble in MBS yields comes as the Federal Reserve has started buying up to $500 billion in MBS backed by Fannie Mae, Freddie Mac and Ginnie Mae.

Beleaguered stock investors looking for hope should be cheered by one prominent market strategist’s view of the year ahead.

Unless we vault back into stocks and leap to grad mutual funds and ETFs again, Wall Street is not going to make any money in 2009. So it is in the self-interest of the financial-services industry to make lots of positive statements, to keep our spirits up and the funds flowing into their products and our fees flowing into their pockets.

Nonmanufacturing sectors contracted at a slower pace in December, according to a Tuesday report from the Institute for Supply Management, but concern persists about the overall decline in business, budget and funding problems and lower employment.

In a sign that further weakening may be in store for the U.S. housing market, an index of sales contracts on previously owned U.S. homes fell 4% in November from the prior month, the National Association of Realtors reported Tuesday.

WASHINGTON (MarketWatch) -- Nonmanufacturing sectors contracted at a slower pace in December, according to a Tuesday report from the Institute for Supply Management. The ISM non-manufacturing index rose to 40.6% in December from a record low of 37.3% in November. Economists polled by MarketWatch were looking for a December result of 37%. The business activity index rose to 39.6% from 33%, new orders rose to 39.9% from 35.4% and the employment index roe to 34.7% from 31.3%.

WASHINGTON (MarketWatch) -- In a sign that further weakening may be in store for the U.S. housing market, an index of sales contracts on previously owned U.S. homes fell 4% in November from the prior month, the National Association of Realtors reported Tuesday. The index, which is considered a leading indicator of existing home sales, was down 5.3% from the prior year. Pending home sales in November fell in all four regions, with declines of 7.2% in the Northeast, 6.7% in the Midwest, 2.4% in the West and 2.2% in the South. The October pending home sales index was revised to a decline of 4.2% from a prior estimate of a 0.7% drop. NAR is calling for a real-estate focused stimulus plan from the government.

AP - House prices in Britain fell by their biggest annual amount in at least 56 years during 2008, as credit seized up and possible buyers stayed out of the market, a leading mortgage lender said Tuesday.

British house prices accelerated their decline in December, falling 15.9% from the year-earlier month, mortgage lender Nationwide reports Tuesday.

In 2008, we certainly learned why some folks shouldn’t try to make predictions about the economy.

All this Wall Street happy-talk nonsense reminds me of the 2000-2002 bear-recession. For 30 months the best and brightest minds on Wall Street were all over the media hustling us: “Market’s hit bottom,” “recovery’s started,” “jump back in now!” Meanwhile “Mr. Market” sank deeper, laughing at their absurd hype, while Wall Street lost $8 trillion of investors’ money.

Reuters - Legislation designed to stem foreclosures by allowing bankruptcy judges to erase some mortgage debt will be introduced by Congressional Democrats on Tuesday, and hopes are high that it will pass after a similar plan failed last year.

Despite some dire financial predictions for 2009, good news is in store for savvy consumers -- if you have good credit and are proactive at looking for banks’ deals and perks.

MarketWatch auto reviewer Ron Amadon selects the top cars from among those he test drove this year.

Most exchange-traded funds track stock indexes, so investing in them last year was like jumping in a stormy ocean with a thousand-pound anchor chained around your waist.

While much of the focus of the past year was on the carnage in U.S. markets, the biggest hit to many investment portfolios came from international stock holdings.

AP - The Federal Reserve Bank of New York said Monday it has begun purchasing mortgage-backed securities in an effort to bolster the battered housing market.

While everyone fretted over housing’s downfall last year, the job market quietly sank into the dumps as well -- until by the end of the year, with more than 500,000 jobs being lost in December alone, the employment outlook overshadowed our other economic woes.

Outlays for construction projects in the United States fall a seasonally adjusted annual rate of 0.6% in November, undermined by a drop in outlays on home construction, government data show.