Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

There were plenty of economic data reports in the holiday-shortened week. Real gross domestic product (GDP) fell at a 0.5% annual rate in the government’s revised estimate for the third quarter of 2008 (compared to -0.3% in the advance estimate). Inflation-adjusted consumer spending fell at a 3.7% annual rate (revised from -3.1% in the advance estimate), and October data indicated at least a 3% annual rate of decline in early fourth quarter of 2008. Durable goods orders plunged 6.2% in October, while September figures were revised lower.

Consumer confidence improved, but details showed that while consumer expectations were less pessimistic than in October, evaluations of current conditions continued to slump. Job market perceptions deteriorated further.

The government announced a bailout of Citigroup, relieving some uncertainty in the markets. President-elect Obama announced his economic team (“the cream of the crop”) and said his transition team was working with Congressional leaders on a massive stimulus package to be enacted in the early days of his administration.

The Federal Reserve announced that it will buy up to $100 billion in agency – Fannie Mae, Freddie Mac, Federal Home Loan Banks – debt, up to $500 billion in mortgage-backed securities, and up to $200 billion in securities backed by credit card loans, student loans, auto loans and loans guaranteed by the Small Business Administration. These efforts are geared to unfreezing the credit markets, a critical component of an economic recovery. The 10-year Treasury note yield fell below 3%.

Next week, policymakers across the pond are expected to lower short-term interest rates further on Thursday. The November Institute for Supply Management (ISM) surveys are likely to be weak. The Fed’s Beige Book, the anecdotal summary of economic conditions from around the country, will tell us what we already know – things are tough all over. The highlight of the week will be the November Employment Report, which is expected to be poor. Some 27,000 Boeing strikers will return to the total, but job destruction has clearly picked up, leaving nonfarm payrolls down sharply (more than 300,000). The unemployment rate is expected to rise to 6.7% (from 6.5% in October).

Indices

	Last	Last Week	YTD return %
DJIA	8726.61	7552.29	-34.21%
NASDAQ	1532.1	1316.12	-42.23%
S&P 500	887.68	752.44	-39.55%
MSCI EAFE	1163.19	1051.92	-48.38%
Russell 2000	468.86	385.31	-38.79%

Consumer Money Rates

	Last	1-year ago
Prime Rate	4.00	7.50
Fed Funds	1.00	4.50
30-year mortgage	5.76	5.8

Currencies

	Last	1-year ago
Dollars per British Pound	1.541	2.069
Dollars per Euro	1.290	1.483
Japanese Yen per Dollar	95.19	108.97
Canadian Dollars per Dollar	1.232	0.996
Mexican Peso per Dollar	13.20	10.97

Commodities

	Last	1-year ago
Crude Oil	54.44	94.42
Gold	816.20	812.60

Bond Rates

	Last	1-month ago
2-year treasury	1.12	1.49
10-year treasury	2.98	3.85
10-year municipal (TEY)	6.46	7.17

Treasury Yield Curve – 11/28/2008

S&P Sector Performance Charts – 11/28/2008

Economic Calendar

December 1	—	Construction Spending (October) ISM Manufacturing Index (November)
December 2	—	Motor Vehicle Sales (November)
December 3	—	ISM Non-Manufacturing Index (November) Fed Beige Book
December 4	—	Bank of England policy Meeting European Central Bank Policy Meeting Jobless Claims (week ending Nov. 29) Factory Orders (October)
December 5	—	Employment Report (November)
December 15-16	—	FOMC meeting