Wall Street Extends Losses

The stock market traded lower at mid-session with traders and investors heading into the week’s final leg of trading with little motivation to buy.

The major averages continued posting negative gains, adding to yesterday’s sharp losses as oil’s seemingly unstoppable incline, at new historic highs past $142 p/b, continued to hold the markets captive.

On the economic front, the Commerce Department on Friday said spending rose 0.8 percent in May, slightly beating the consensus expected gain of 0.7%. The report also said personal incomes surged 1.9 percent – far outpacing the consensus expected gain of 0.4%. Much of this increase is attributed to the outlay portion of the tax rebates.

After taxes, disposable incomes surged 5.7 percent in May, the largest amount in more than three decades, and up 10.7% versus last year.

Despite the positive economic data about US consumer income and spending, the factor-combination of oil prices, the weak dollar and concerns about inflation – continue to weigh heavily on investors’ minds.

However, and worth emphasizing is that – our economy is nowhere near a consumer-led recession. That’s a fact. What’s important at this juncture is not to lose focus. Keep in mind, things are not as gloomy as they appear to be. But, we must take action.

Meaning, the Fed at this point has an obligation to raise interest rates from current levels since now the economy can certainly stand it. This will subsequently help the greenback strengthen to much firmer levels and will inevitably start to hurt oil prices while reducing inflation fears. It can be done. We are still after all a free-enterprise system.

In other news, new reports are indicating Merrill Lynch (NYSE: MER) may incur additional write-downs in the second quarter of fiscal ’08. Meanwhile, Bank of America (NYSE: BAC) is planning to slash its employee headcount after it closes its acquisition of Countrywide Financial (NYSE: CFC). The layoffs are expected to take place over a couple of years. American International Group (NYSE: AIG) will likely absorb $5 billion in losses from its insurance units after their securities lending accounts suffered $13 billion in write-downs, according to Bloomberg.

On the earnings front, Accenture (NYSE: ACN) topped analysts’ estimates for the most recent quarter and provided upside guidance for its fourth fiscal quarter. Accenture also raised its full-year outlook. KB Home (NYSE: KBH) reported a loss for its second quarter that was worse than analysts anticipated.

M&A, Anheuser-Busch (NYSE: BUD) has officially rejected InBev’s unsolicited takeover bid on grounds that the offer is inadequate and is not in the best interest of shareholders. InBev is now making a hostile bid, according to Financial Times.

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