The sparse quantity of economic news this past week continued to provide traders and investors with confirmation of previously held perceptions of the state of the economy.

New jobless claims came in at 589,000, significantly ahead of market projections of 555,000 and above the previous weeks' report of 527,000 new claims.

Housing starts were reported at 550,000 versus market forecasts of 600,000 and the previous month's report of 625,000.

The major news of the week, however, came from the banking sector and the U.S. Treasury.

The banking sector continues to sag under the weight of severe pressure on the bank's balance sheets. Bank lending in the 4th quarter plummeted as over $1 trillion in losses and write-down of assets have required banks to add billions to their loss reserves.

The asset-backed securities market remains frozen. Without access to the securitization market, banks aren't able to gain liquidity by selling their mortgages, credit card debt and car loans.

Troubled Asset Relief Program (TARP) funds made available to banks have been used to bolster reserves and have not yet had an impact on the availability of credit for companies and individuals.

The Obama administration has sent signals of its willingness to utilize remaining TARP funds and additional funds if necessary for the original purpose of the funds, which was to purchase troubled assets and set up a "bad bank" to hold these loans and securities.

The Treasury made news on several fronts this week. Perhaps of greatest importance was the steep drop in the price of treasuries. The benchmark ten-year closed the week at a yield of 2.62%, a 43 basis point increase for the week. The 30-year treasury finished the week at 3.32%, which was 28 basis points below the closing price at the end of last week.

Both these changes were among the largest in the last 25 years. Market participants are reacting to the anticipated explosion in the issuance of new Treasury securities to fund the injection of capital into the banking system and to fund the administration's stimulus package.

Mortgage rates continued to decline during the week. The real rate for mortgages, however, remains historically high. The real rate equals the spread between the 30-year mortgage and the 10-year Treasury. That spread stood at 2.5% compared to 1.6% in 2003 and 1.5% in 1993.

The one bright spot of news for the week came from the corporate bond sector, where the spread between investment grade corporate's and the 10 year treasury dropped from 6.56% in December 5 to 5.6% at the end of the week.

Economic data to be released in the coming week are not likely to show any improvement in the economy. Declines are expected in consumer confidence, durable goods orders and new home sales. Consumer confidence and consumer sentiment are likely to remain low and the leading indicators will most probably continue on the negative side.

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com. James F. Dlugosch contributed to this article.