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Drew Industries, Inc. (NYSE:DW) CEO Leigh Abrams said 2008 is turning out to be a “very challenging year” for the White Plains, N.Y.-based RV and manufactured homes maker. Abrams made the comments during a midday Monday conference call.

“The turmoil in the real estate industry and the mortgage markets and the focus on recession all have severely impacted consumer confidence, which was recently at its lowest level in the last five years,” Abrams said. “Generally, under such conditions, purchases of discretionary big-ticket items such as RV and boats slow down. In spite of these conditions, we are pleased with our first-quarter results.”

The possibility of new legislation for Title 1 programs, which provide Federal Housing Authority-backed mortgages, would help boost the manufactured homes industry, the CEO said. Proposed legislation would boost the amount that the FHA is allowed to guarantee on a manufactured home to about $70,000 from less than $50,000.

“If this legislation is finally enacted, it could represent a good boost for the manufactured housing industry,” Abrams said.

The chief executive said the remainder of 2008 remains a “puzzle.”

“My gut tells me that RV total sales will be down more than 10%, which conforms to the projection of the [Recreational Vehicle Industry Association] of a 13% decline in shipments of fifth-wheel RVs,” Abrams said. “My gut also tells me that this will be the first year that is not aided by hurricane-related housing in a long time. We will . . .

Small-cap stocks started out the week in the red, but the early dip in equities did not live up to the selling interest suggested by overnight trends and a surprisingly stout ISM Non-Manufacturing Survey sparked a bout of buying that lifted stocks back toward steady levels. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was down 1.05, or 0.1%, at 724.69.

The ISM Non-Manufacturing Survey came out at 52%, which was well above the median forecast of 49.5%, and the highest point since December. The reading also snapped three consecutive months of contractions, which is a plus for the economic outlook.

The market had a bit of the merger blues this morning after weekend news that Microsoft (Nasdaq:MSFT) pulled out of negotiations for a takeover bid of internet services company Yahoo! Inc. (Nasdaq:YHOO). Yahoo shares took it in the chin on the news, sinking 18% in early trading Monday. The deal was reportedly close to fruition and the failure to close might take some excitement out of the M&A picture — at least in the short run. That said, wireless phone company Sprint (NYSE:S) was up 7% on news that the firm could be a takeover target.

Marvel Entertainment Inc. (NYSE:MVL) shot up nearly 8% this morning . . .