In its best three-day stretch since 1931, Wall Street roared back to life this week despite some incredibly abysmal unemployment numbers. 

The big news that helped rally markets was the Senate passing a $2 trillion stimulus bill. The bill includes a payout to American families, a $500 billion pool of taxpayer money to help businesses and $25 billion in grants to airlines among other items. The news of the Senate's passing of the bill helped the Dow jump by 1,300 points, well over the 22,000 point mark, on Thursday. The House of Representatives is expected to vote on the bill Friday afternoon. House Speaker Nancy Pelosi is confident that the bill will pass “with strong bipartisan support.”

It seemed somewhat incredible considering Thursday morning the Labor Department released data showing more than 3 million people applied for unemployment benefits last week. The previous record high was 695,000 set back in 1982. 

Federal Reserve Chairman Jerome Powell appeared on NBC's “Today” show on Thursday morning and called what we are seeing a “unique situation.” Powell continued, saying, "People need to understand, this is not a typical downturn. At a certain point, we will get the spread of the virus under control. At that time, confidence will return, businesses will open again, people will come back to work. So you may well see a significant rise in unemployment, a significant decline in economic activity. But there can also be a good rebound on the other side of that."

If you're wondering how in the world the stock market saw such a surge despite unemployment numbers more than quadrupling their worst performance ever, you're not alone. But the explanation is fairly simple: The markets were expecting it. As one investor said, "The markets and the economy don't run in parallel. The market's running way ahead of the economy. The markets don't care about what's happening today, the market cares about what's happening six months from now."

That means the negative headlines we knew were coming were already priced into the market. Many investors actually see this rally, despite the horrible unemployment number, to be a good sign that we may have seen the bottom already. It is important to remember that positive swings hinge on the third piece of the trifecta (government, stock market and health care) which is the virus itself. Unless there is an end in sight, like a potential vaccine or treatment, markets will remain volatile. 

The 10-year Treasury note yield was little changed on Thursday, sticking right around 0.8% even after the jobs news. Government bonds did see negative yields this week with the 3-month and 2-year notes both dropping below 0%. The 2-year is still perilously close to the negative mark, sitting at 0.273%. Meanwhile, the 3-month note remains in negative territory at -0.043%. 

Mortgage industry pulled both ways 

We've talked extensively during the past week about the Federal Reserve buying unlimited agency mortgage-backed securities. That is an absolute necessity for the mortgage industry because, without that support, there would be very few buyers to absorb the incredible amount of loans being produced. 

The bad news is that the Fed's hand was forced because all the other investors pulled out of the market. You'd be hard-pressed to find a lender offering an extensive non-QM loan portfolio at the moment because the loans themselves are far riskier and investors are not going to back them.

And as the federal government starts to offer mortgage payment deferment for Americans, servicers are feeling the strain. This week, Fannie Mae and Freddie Mac announced a plan that would allow borrowers to defer payments for two months and just simply add those months to the end of their mortgage terms. Many banks have followed suit allowing multiple month deferrals for borrowers.