Then, Fed vice chairman Donald Kohn spoke the magic words “flexible and pragmatic policy.” The Dow Jones Industrial Average soared north in response and the Dow had its best two-day rally since 2002: a 2.55% increase.4 With plain signs of easing at the Fed, investors raised their hopes for December, even with rising foreclosures, poor home sales, and middling consumer spending.

Domestic economic health. There were clear signs of a slowdown – so clear that the Fed and White House revised economic projections downward. In mid-November, the Fed forecast that the U.S. economy would grow only 1.6-2.6% in 2008, as compared to the 3.9% GDP chalked up in 3Q 2007. 5 The Fed revealed that the pace of manufacturing declined 0.4% for October; output at factories, mines and utility companies declined 0.5% for October.6

Corporations felt the brunt of the credit crisis, and expressed them in their earnings reports. Early in the month, General Motors reported a $39 billion 3Q loss.7 Washington Mutual projected total 2007 losses approaching $2.2 billion.8 Wachovia announced a $1.1 billion writedown for October; Citigroup said it might write down $8-11 billion for the fourth quarter, Morgan Stanley $3.7 billion for 4Q and Bank of America $3 billion for 4Q.9

Consumers were also facing challenges, and not just at the pump; the Labor Department noted a 0.3% increase in its Consumer Price Index for October, and unemployment claims hit a four-week high in mid-November at 339,000.10

Global economic health. The euro flirted with the $1.50 mark late in November, and the EU statistics agency announced that Eurozone inflation had climbed to 2.6% for October.11 Eurozone 3Q growth was 0.7%, an increase from 0.3% in 2Q.12 But England’s economy also expanded at a 0.7% pace, a relative disappointment.13

In Asia, senior International Monetary Fund official Jerald Schiff made an encouraging prediction for that region’s economies, revealing an IMF forecast of a mild 2008 slowdown for the region but a “sizable risk of a U.S. recession and a sharper global slowdown.”14 New data showed Taiwan’s economy growing at its fastest pace in three years during the third quarter: 6.9%.15 Thailand’s economy was also hot for the 3Q, growing at 4.9%.16 But according to Bloomberg data, the economy of the Philippines topped the Southeast Asia region, with a 6.8% GDP for 3Q.17 Even Japan enjoyed 2.6% growth in the quarter.18 And India outpaced them all, with 8.9% GDP for the third quarter.19

World financial markets. As usual, European and Asian markets suffered with the consequences of the U.S. markets. In fact, overall, global equities had their worst month since 2002.20

In Europe, the Stoxx 600 had its worst month in more than a year with worries about the U.S. housing sector and credit crisis. But at the end of November, European stocks advanced the most since June, mirroring Wall Street.20 China’s benchmark CSI 300 Index and the Shanghai Composite Index dropped 17% and 18% on the month. (But the CSI 300 was still up 132% for the year at the end of November.)21 On November 26tth, there was a bit of a rebound underway for other Asian indexes, as they rallied in response to U.S. consumer spending for the holiday season: on that day, the Hang Seng jumped 4.1% and South Korea’s KOSPI closed up 4.7%.22

Commodities markets. Few would have predicted oil prices at the $89 level at the end of November, but that was the reality. Oil went from the mid-$95s to over $99 per barrel by November 21st before pulling back. As for gold and silver, gold prices topped the $830 mark in late November before losing $42.70 in the last week of the month to close November at $789.10 per ounce.22 Silver prices briefly crested $16 an ounce, but fell back to $14 an ounce by the end of the month.23 Wheat prices soared 15% in the second part of November.24

Housing & interest rates. The good news was that pending home sales rose 0.2% in September … but they were still 20% below levels of one year ago, said the National Association of Realtors. 25 The Commerce Department reported that new home sales were up 1.7% in October … but still 23.5% under October 2006 levels. RealtyTrac had October 2007 foreclosure filings at 224,451, up 94% from a year ago.26 And NAR announced a year-over-year decline in residential resales of 20.7% for October.27

Mortgage rates necessarily descended. By the last week of the month: conventional mortgages bore their lowest interest rate averages since May: 30-year FRMs were averaging 6.20%, according to Freddie Mac, while Averages on 15-year FRMs, 5-year ARMs and 1-year ARMs were 5.83%, 5.88%, and 5.42% respectively. 28

Speaking of mortgages, the month of November ended with Treasury Secretary Henry Paulson preparing a carefully considered plan with mortgage industry leaders to freeze interest rates on ARMs and other adjustable-rate loans. 29

Major indexes. It was an especially bad month for the NASDAQ (see below), and all three big indexes went into negative territory for November. But, the month-end Wall Street rebound put them well back into the black for the year.