U.S. stocks were mixed in morning trading on Friday, failing to post a significant rebound a day after the Dow suffered its second-worst percentage loss of the year and closed at its weakest level in 21 months while key inflation gauge showed signs that consumer spending surged in May.

Stocks tumbled Thursday, with the Dow seeing its second-biggest slide of the year, as oil prices spiked to fresh records and a brokerage downgraded Citigroup and other banks. The two events exacerbated fears about inflation and the credit crisis, sparking a broad stock selloff.

Personal consumption increased by 0.8 percent compared to the month before, the Commerce Department said Friday. That was the biggest gain since 1.0 percent in November 2007. April spending rose by 0.4 percent, revised from a previously estimated 0.2 percent increase.

U.S. light crude for August delivery rose 81 cents to $140.45 a barrel on the New York Mercantile Exchange after surging to a record $142.26 in electronic trading.

The national average price for a gallon of regular unleaded gas fell to $4.066 from $4.067 the previous day, according to AAA.

Merrill Lynch & Co stock fell after a report by a Lehman Brothers analyst said the bank is likely to incur $5.4 billion of write-downs in the second quarter, mainly from its exposure to bond insurers. Shares fell 2.5 percent to $32.23 and highlighted concerns the broker may need to raise capital.

Inflation