The economic calendar is unusually light this week, with only the ISM Index reporting on Friday. It shouldn’t surprise anyone that the report will likely show a decline from the previous month. It has been an overriding theme this year that even though the bar gets set lower and lower as the months go by, the market still manages to underestimate the scope of the economic slowdown and reports continue to disappoint.

The market has rallied eight times since it peaked last October. If Friday was the beginning of another rally, it would mark the ninth time.

Foreclosure filings in the US rose 48% on the previous year in May, providing further evidence of a deepening housing market slump.

“While the U.S. housing market is still searching for its bottom, the situation is much livelier just south of the border.” says Sara Nunnally in Taipan Daily. “Mexico’s housing sector is seeing a strong resurgence.”

More grim news for the struggling US economy: The number of foreclosures just keeps on rising. This from The Wall Street Journal:

The number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties.

High gas prices — now at about $4 a gallon — are triggering a surge in hybrid-car sales in the US. This from the LA Times:

Although hybrid cars account for only about 3% of U.S. car sales, their share is growing rapidly. Sales of hybrid cars surged 25% during the first four months of this year compared with the same period last year. And the pace accelerated last month, when sales jumped 58%. That outpaced the overall April sales gain of 18% for small fuel-efficient cars and comes as total new-vehicle sales are slumping.

Look at a nationwide map of foreclosures, and you just might be looking at a hollowed-out future of exurban America. I alluded to this phenomenon a couple of days ago in musing over Sen. Obama’s ill-considered remarks that implied giving the developing world effective veto power over American driving and dietary habits.

US foreclosure filings climbed 65% and bank seizures more than doubled in April from a year earlier as mortgage industry efforts to modify loans fell short, reports Bloomberg.

More than 243,300 properties were in some stage of foreclosure, the highest monthly total since RealtyTrac Inc., a seller of default data, began in January 2005. One in every 519 households received a filing and Nevada, California and Florida had the highest rates. Filings rose 4 percent from March.

The next president will face soaring foreclosures, insolvency at Freddie and Fannie, street protests against foreclosures, and a growing number of bank failures. It’s not too hard to guess what’s likely to happen next, is it?

I’ve been begging analysts to get real and take off those rose-colored glasses for months now. Their unwarranted optimism has resulted in two incredibly wrong-headed predictions.