* The corrected headline figure in the Institute for Supply Management's May manufacturing index Monday showed that the sector should continue to be a positive force in the economy for the rest of the year, according to ISM survey chief Bradley Holcomb. The ISM released a corrected purchasing managers index of 55.4, which reflected a 0.5 point increase from the previous month's figure. The initial set of errors was due to a software issue which applied April's seasonal adjustment factors to the May report. "We're on a very good trend with continuous growth certain for this year," Holcomb told MNI, adding that "manufacturing has shown itself to be very robust through this entire five-year recovery period." The sub-indices were a mixed bag of relatively sharp changes, with the production, prices, and customer inventories showing healthy increases, and employment, supplier deliveries, order backlogs and imports all posting sizable drops.
* Construction spending rose only 0.2% in April, much weaker than the 0.7% rise expected due to a flat reading for private spending, data released by the Commerce Department Monday morning showed. While the April gain was smaller than expected, it followed upward revisions to February and March construction. As a result of the revisions and the small April increase, the level of total construction spending, at $953.5 billion, is the highest since March 2009.
* U.S. retail sales of new vehicles were sturdy in May, as generally happier consumers took advantage of improved credit availability right through an extra car-shopping weekend, according to auto dealers. Auto dealers told MNI the calendar quirk gave this May five weekends compared to four in May 2013, and extended manufacturers' holiday buying incentives by at least several days. Lenders, meanwhile, are making it easier for more drivers to buy new vehicles, providing better access to financing for consumers with less than optimal credit. Dealers said that customer sentiment is gently rising amid job creation and greater job security. Up-line purchases are returning.
* Participants at the Chicago Federal Reserve Bank's Automotive Outlook Symposium lowered their expectations for U.S. economic growth to just above 2%, after previously predicting a pace closer to 3%, while projecting consumer prices to increase and the unemployment rate to continue it rapid decline. And according to forecasts published Monday by the Chicago Fed - the event was held in Chicago May 30 - auto sales are projected at 16 million units this year, while the benchmark U.S. oil price is expected to average $99 per barrel.
* The proposal by the Obama administration to significantly reduce carbon emissions from currently operating power plants has prompted blistering responses from congressional Republican leaders. Environmental Protection Agency Administrator Gina McCarthy announced Monday a draft rule that would require cuts in carbon dioxide emissions of 25% by 2020 and 30% by 2030 as measured against 2005 levels. House Speaker John Boehner ripped into the administration's proposal, saying in a statement, "The president's plan is nuts, there's really no more succinct way to describe it."
* Nearly two million homeowners who received a mortgage modification are seeing their monthly payment increase and more than 40% of them have mortgages with a loan balance that is more than their home is worth, Black Knight Financial Services said in a report Monday. "While the national negative equity rate as of April stands at 9.4% of active mortgages, the share of underwater modified loans facing interest rate resets is much higher - over 40%," Black Knight's manager of Loan Data Kostya Gradushy said. "Given that the data has shown quite clearly that equity - or the lack thereof - is one of the primary drivers of mortgage defaults, these resets may indeed pose an increased risk in the years ahead," he added. But Laurie Goodman, the director at the Urban Institute center for housing policy, and Jun Zhu, a senior financial methodologist at the center, wrote in a research brief that the first two rate resets should be manageable for most borrowers but the third reset could be "problematic" with many loans resetting to from 4% to 5% in 2016 and 2017.
* The U.S. Senate will return to Washington this week and resume its seemingly endless battles over dozens of executive branch and judicial nominations. The House is not in Washington this week. Senate votes may include one on Sharon Bowen to be a commissioner on the Commodity Futures Trading Commission and Sylvia Burwell to be the secretary of the Department of Health and Human Services. It is unclear if Senate Majority Leader Harry Reid will try this week to bring up the nominations of Jerome Powell and Lael Brainard to be governors on the Federal Reserve Board and seek a vote on Stanley Fischer to be vice chairman of the Fed.
* Ten-year U.S. Treasury yields were closing at 2.537%, after holding a 2.475% to 2.541% range Monday. The 10-year hit a low of 2.40% Thursday, a far cry from the 3.0% peaks seen at the start of 2014.
* The euro was trading Monday at $1.3597 at Monday's close, on the low side of the day's range of $1.3588 to $1.3644. In other pairs, dollar-yen was trading at Y102.42, on the high side of a Y101.76 to Y102.48 range, with the pair underpinned by rising U.S. Treasury yields as well as Japan specific factors also, such as Government Pension Investment Fund (GPIF) out lows and renewed talk of a corporate tax cut.
* In other markets, U.S. stocks were mixed at Monday's close, but maintain the bulk of the day's gains. The Dow Jones Industrial Average closed up 26 at 16,743.63, the Nasdaq Composite down 5 pts at 4,237.199 and the S&P 500 closed up 1 pt at 1924.97. These are record high closes for the DJIA and S&P 500.
* In the wake of the latest tumble in gold prices, market players who had been feeling bullish recently, felt as if they have been snookered yet again by the precious metal. Spot gold was trading around $1,243.00 an ounce Monday afternoon, on the low side of a $1,241.11 to $1,250.92 range. From a historical perspective, 2013 was a year of reckoning for gold bulls, with prices topping out around $1,695 in mid January, and then ratcheting lower over the course of the year. Gold hit a low of $1,180.57 June 28, 2013, then recovered to $1,433.73 in late August, only to retreat and post a low of $1,182.57 on December 31.
* The Bank of Canada will make no change to its 1.0% policy interest rate on Wednesday nor to its neutral tone on whether the next rate change some time ahead might be up or down, analysts said. However, the predictions now are shifting to near-unanimity that the coming change, in about mid-2015 or a quarter or two later, will almost certainly not be a rate cut but a rate hike, even if the BOC is not yet suggesting that.
--MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com