The debt crisis in Greece overshadowed strong economic reports last week, driving investors to seek the relative safety of US Treasuries and mortgage-backed securities (MBS). Significant improvement in manufacturing, housing and employment could not deter a 7% correction in stocks as the US economic recovery gains momentum. The Institute for Supply Management’s manufacturing index rose to 60.4, the highest level since June 2004. Readings greater than 50 signal expansion and today’s report marks a ninth consecutive month of growth. Pending Home Sales rose 5.3% in March, according to the National Association of Realtors. The report showed a 13% gain in the South, a 1.9% rise in the West and a 1.2% increase in the Midwest. Pending sales fell 3.3% in the Northeast. Compared with March 2009, pending sales rose 24%. The US gained 290,000 non-farm jobs in April, but the Unemployment Rate increased, moving from 9.7% to 9.9%. Individuals who had previously given up looking for work, and were no longer considered to be part of the labor force, sensed improving economic conditions and resumed their job search. Despite all the positive news, it was the uncertainty in Europe that led to US stock market volatility during the week, highlighted by the Dow Jones Industrial Average dropping 991 points (almost 10%) on Thursday at its low point, before rebounding over 600 points just moments later. The Dow dipped below 10,000 momentarily during the biggest intraday point drop in its history. Media reports claimed that a $16 million sale by a bank accidentally turned into a $16 billion sale, although this rumor has yet to be confirmed. Regardless, once automatic trading systems saw that amount of selling, more selling kicked in, leading to a vicious cycle. This “flight to quality” helped lead US mortgage rates considerably lower for the week. Over the weekend, the European Union and the International Monetary Fund joined forces to offer almost $1 trillion to bail out Greece and other European countries and to help stabilize the region. The stock market responded by rallying 400 points today! Currently, the 30-Year Fixed sits at 4.625% (4.773% APR) and the 15-Year Fixed is at 4.000% (4.262% APR). This week we will see the latest round of Treasury auctions and Retail Sales.