On March 11th we wrote, "Lots of headlines to digest lately. What region is the market focused on again? North Africa, the Middle East, Spain, Portugal, Greece, China, Japan, the U.S.? What trade is the market working right now? Long Oil? Short Stocks? Long Gold? Short Bonds? Short the Dollar? Wait. What about economic fundamentals? Expansion? Contraction? Inflation? Deflation? Reflation? Rate Hike? QEIII? Certainly enough to make you wonder what's priced into asset valuations and what isn't priced into asset valuations"

Although we experienced much price volatility yesterday, it was a slow, sideways session on the street. A real snoozer. Continually developing events around the world have led to a new level of exhaustion. Markets seem stuck in "Wait and See" mode as a result. Let's see if we can't sum up the situation with a few headlines...

1. JAPAN: NUCLEAR MELTDOWN AND EARTHQUAKE CLEAN UP

I've been following CNN and Reuters. CNN updates a living story as the situation develops. Reuters does the same but allows web users to contribute commentary and ask questions. 

CNN last updated at 9:02AM this morning. 

• Reactor 1: Still in danger of a meltdown. Fuel rods have been partly exposed, and the core of reactor is believed to have been damaged. Workers have been pumping a mix of seawater and boron into the reactor to prevent further core damage until coolant systems can be brought back on line.
  
• Reactor 2: Coolant pumps and electrical components were damaged and the earliest those parts can be replaced is Wednesday, TEPCO reported. Officials say fuel inside the reactor has been partially exposed as temperatures rose and water levels dropped. Workers have injected seawater into the reactor.
• Reactor 3: Officials say fuel inside the reactor has been partially exposed as temperatures rose and water levels dropped. Workers have injected seawater into the reactor. A pool containing spent fuel rods is a chief concern. Firefighters continued dousing the pool with water Tuesday to keep those rods, which contain radioactive material, cool. Gray smoke emerged from the building Monday. By Tuesday, the smoke was white and was dissipating. Officials have not said what caused it.
• Reactor 4: The reactor does not contain any fuel rods, but the pool that houses the spent fuel rods is a chief concern. Crews used cement pumps to spray water on the pool Tuesday to keep the fuel rods cool. No damage is suspected in the reactor's containment vessel. Tokyo Electric Power Co. hopes to restore power to this reactor Tuesday, which could bring cooling systems back online.
• Reactor 5: Workers created vent holes in the building's roof to avoid a hydrogen explosion. The cooling system is working and powered by a generator. That controls the temperature of the reactor, which is in cold shutdown, and the pool containing spent fuel rods.
• Reactor 6: Workers created vent holes in the building's roof to avoid a hydrogen explosion. The cooling system is working and powered by a generator. That controls the temperature of the reactor, which is in cold shutdown, and the pool containing spent fuel rods.
  
  

Summer blackouts loom for Japan's economic heartland: (Reuters) - Japan's economy may not feel the harshest blow from this month's disasters until summer, when surging power demand could spark a new round of power blackouts in Tokyo and its neighboring prefectures which account for 40 percent of the country's GDP.

Plain and Simple: Positive progress has been communicated by Japanese officials, but resolution does not appear imminent. Japan has a steep uphill battle ahead. In both the short-term and long-run.

2. UNREST IN NORTHERN AFRICA AND THE MIDDLE EAST....

Gaddafi shells rebel towns, U.S. plane down: (Reuters) - Muammar Gaddafi's forces attacked two west Libyan towns, killing dozens while rebels were pinned down in the east and NATO tried to resolve a heated row over who should lead the Western air campaign. With anti-Gaddafi rebels struggling to create a command structure than can capitalize on the air strikes against Libyan tanks and air defenses, Western nations have still to decide who will take over command once Washington pulls back.  The United States will cede control in days, President Barack Obama said, even as divisions in Europe fueled speculation that Washington would be forced to retain leadership of air patrols that will replace the initial bombardment. In the first apparent air force casualty of the campaign, a U.S. F-15E crashed in Libya overnight and its two crew members were rescued, the U.S. military said. The crash was likely caused by mechanical failure and not hostile fire, it said.

Algeria demands end to air strikes on Libya :(Reuters) - Algeria Tuesday called for an immediate end to Western military intervention in neighboring Libya, Algeria's state news agency reported. "We judge this intervention to be disproportionate in relation to the objective set out by the United Nations Security Council resolution," the APS news agency quoted Algerian Foreign Minister Mourad Medelci as saying. "(We demand) an immediate cessation of hostilities and foreign intervention."

Emerging powers join in opposition over Libya strikes: (Reuters) - China said on Tuesday that Western air strikes on Libya risked a "humanitarian disaster," adding to the chorus of criticism from big emerging powers over the U.N.-authorized campaign. China, with Russia, India, Brazil and other developing countries have condemned the U.S.-led air strikes on Libyan leader Muammar Gaddafi as risky and unwarranted overreaching by the West. The shared opposition to the Libya campaign could become a point of diplomatic convergence among the "BRICS" bloc of major emerging economies -- Brazil, Russia, India, China and South Africa -- which hold a summit in south China next month.

Bahrain says it has foiled "foreign plot": (Reuters) - Bahrain's king said a foreign plot against his Sunni-led island state had been foiled, and the head of the Gulf Cooperation Council warned that interference by Shi'ite Iran in the Gulf Arab states would not be tolerated.  Confrontation between Sunnis and Shi'ites has stirred international tension in the oil-exporting region, gripped by its worst unrest in years. "An external plot has been fomented for 20 to 30 years until the ground was ripe for subversive designs... I here announce the failure of the plot," King Hamad bin Isa Al Khalifa was quoted as telling troops in a report by state news agency BNA. Had the plot succeeded, he said, it could have spilled into neighboring states.

Yemen president warns of civil war, U.S. concerned: (Reuters) - Yemen's president warned on Tuesday that his country would descend into civil war if he is forced to quit and Washington voiced concern about instability in the Arabian state where al Qaeda has a stronghold. Unrelenting anti-government protests, which first began on February 3, and fresh defections among the ruling elite have added to the pressure on Saleh, a U.S. ally against radical Islamists, to step down immediately after 32 years in power. But an aide said the president would leave office only after organizing parliamentary polls by January 2012 and he refused to hand over power without knowing who would succeed him.  Defense Secretary Robert Gates voiced rare public alarm about the situation in Yemen: "We are obviously concerned about the instability in Yemen." He added that he was mainly anxious to avoid "diversion of attention" from opposing al Qaeda there.

Israeli tank shell hits Gaza home, five hurt: medics: (Reuters) - Israeli tank fire struck a house in the Gaza Strip Tuesday, injuring at least five people, Palestinian medics said. The Israeli military had no immediate comment on the report, but said 4 rockets had been fired at Israel during the day from the enclave, which is ruled by the Islamist Hamas group. Israel launched a series of air strikes in Gaza Monday, wounding 19 people, following a barrage of mortar and rocket fire.

Protesters march in south Syria for fifth day: (Reuters) - Hundreds of people marched in two southern Syrian towns Tuesday demanding freedom, the fifth straight day of demonstrations challenging the ruling elite. The protests took place in the city of Deraa and the nearby town of Nawa, they said.  "Freedom, freedom. Peaceful, peaceful," shouted protesters who gathered near the Old Omari mosque in Deraa, which has become the main site of demonstrations in the city.

Plain and Simple: Gaddafi forces aren't stopping their attacks and coalition forces aren't exactly sure what to do about it.  In the meantime, U.N. intervention efforts are being condemed by surrounding countries and emerging economies. Making the situation a bit more sticky....uprising contagion is spreading through an already sensitive oil-producing region.  It's been spreading since King David captured Jerusalem in 996 B.C. though.....

3. Europe

Euro zone "Unfinished Symphony" is no masterpiece: (Reuters) - Unlike Schubert's Unfinished Symphony, Europe's incomplete "comprehensive response" to the euro zone debt crisis is unlikely to be rated a masterpiece. When European Union leaders complete a package deal this week to tighten fiscal discipline, improve economic policy coordination and strengthen their financial backstops, they will leave much unfinished business. "The relative calm now prevailing in euro zone financial markets should not deceive us," said Marco Annunziata, chief economist at GE. "Investors have given them the benefit of the doubt, but if EU leaders fail to deliver, tensions will surge anew, jeopardizing the recovery," he wrote in a syndicated column for the Eurointelligence economic website.

Portugal to hold austerity vote on Wed, government on ropes: (Reuters) - Portugal's parliament will vote on the government's latest austerity measures on Wednesday, setting the stage for a potential collapse of the minority Socialist administration a day before a European summit. Prime Minister Jose Socrates has threatened to resign if the opposition fails to approve the measures. The main opposition Social Democrats (PSD) are refusing to back them and have begun to talk about snap elections, complicating the country's drive to avoid following Greece and Ireland in taking a bailout. The government on Monday presented its latest economic plan, which showed it now expects there to be a recession in 2011 as most economists have forecast. The document predicted a contraction of 0.9 percent in gross domestic product this year compared with the previous estimate of 0.2 percent growth.

UK inflation revives talk of early interest rate move: (Reuters) - Inflation surged to a 28-month high of 4.4 percent last month, reviving speculation that the Bank of England will not wait much longer to raise interest rates. The Office for National Statistics said consumer price inflation rose to 4.4 percent in February from 4.0 in January, higher than the 4.2 percent forecast by economists. Housing costs, domestic heating bills and clothing prices were largely to blame. Retail price inflation, a broader measures which is used as a starting point for many wage negotiations, rose to 5.5 percent from 5.1 percent, its highest since July 1991. Six of the Bank's nine-member Monetary Policy Committee voted to keep rates on hold in February, while three voted for a rise from a record-low 0.5 percent. A voting breakdown for the BoE's March meeting is published on Wednesday. Those MPC members in favour of keeping rates steady last month saw inflation falling sharply next year without big rate rises, and were concerned an unexpected sharp fall in fourth-quarter output may presage an extended period of below-par growth.

Plain and Simple: An abundance of negative news headlines have overshadowed signs seen by the Federal Reserve that suggest our economic recovery is on "firmer footing". The end result is an overabundance of uncertainty. Traders are stuck in "wait and see" mode. From that perspective,  we're looking for benchmark interest rates to establish a new range, but remain conscious of the market's sensitivity to a headline news driven "flight to safety".   What does this mean for mortgage rates? Unless the situations recapped above deteriorate further, current mortgage rate levels are about as good as it gets. A sustained bond market rally is needed if real money investors are to move "down in coupon". 

READ MORE: MBS LEDGE: Room to Rally with Little Reward to Offer

Drip, drip, drip....