U.S. Stocks Turn Up As Quarterly Losses Loom

NEW YORK (MarketWatch) -- U.S. stock indexes on Monday tilted slightly higher, starting off a week filled with data that many believe will affirm the picture of recession, with equities looking to close the quarter with their steepest losses in nearly four years.

"The worst quarter since the first half of 2002 will be in the books at the close today, and not a day too soon," said Paul Nolte, director of investments at Hinsdale Associates.

Up and down in early trade, the Dow Jones Industrial Average was recently up 8.15 points at 12,224.55, with the blue-chip index looking at quarterly losses of roughly 8%.

Of the Dow's 30 components, seven were posting losses, led by Merck & Co. Inc., off 16%.

Shares of Merck and Schering-Plough Corp. both hit the skids in the wake of clinical data showing their drug Vytorin to be no more effective in treating heard disease than less-costly generic alternatives. .

Gains on the Dow were led by J.P. Morgan Chase & Co. , up 3.1%.

The broader indexes headed to double-digit quarterly declines, with the S&P 500 up 4.35 points to 1,319.57, positioning it for first-quarter losses of 10% or more, while the Nasdaq Composite climbed 5.82 points to 2,267, with the technology-heavy measure still in line for a nearly 15% quarterly drop.

Volume on the New York Stock Exchange neared 895 million, while almost 400 million shares were exchanged on the Nasdaq. Advancing stocks outdid declining issues on both exchanges, by nearly 5 to 4 on the NYSE and running just ahead of the Nasdaq.

Windy City

Weekly data started Monday with the release of the Chicago Purchasing Managers Index, which climbed to 48.2 in March from 44.5, with the better-than-expected reading coming ahead of the national Institute for Supply Management manufacturing survey scheduled for Tuesday.

Economic reports slated for release include Friday's March employment report, which Nolte says is likely to show "another contraction in payrolls, further fueling those sitting on the fence that we are indeed in a recession."

"Forget recession, we have jumped right into depression-like reforms -- it's a mad, mad, mad world!" said Kevin Giddis, managing director of fixed-incoming trading at Morgan Keegan & Co. Inc., of the Bush administration's call for sweeping changes in the oversight of financial companies.

U.S. Treasury Secretary Henry Paulson on Monday defended his regulatory blueprint, saying initial reviews that the plan amounted to less oversight of Wall Street are incorrect. "The blueprint is about structure and responsibilities -- not the regulations each entity would write," Paulson said.

Asian markets dropped, with stocks in Japan dragged down by financials. .

In Europe, stocks also fell, with telecom shares leading the way, as the market looked set to record its largest quarterly loss since 2002. .

By Kate Gibson