Stocks inch higher to close out worst quarter since 2002

NEW YORK -- Stocks closed a dismal first quarter with a moderate gain Monday, rising after a reading on regional manufacturing came in better than expected and as investors examined details of a government plan to overhaul the way Wall Street is regulated.

Even though the market posted gains on the last day of the first quarter, it had its worst quarterly performance in 5½ years with the U.S. economy showing signs of tipping into recession as the worsening credit crisis claimed ever-larger victims.

After a steady diet of dismal economic news, a key barometer of manufacturing growth offered a glimmer of hope. The Chicago Purchasing Managers Index, considered a precursor to the Institute for Supply Management manufacturing survey on Tuesday, rose to 48.2 in March from 44.5 a month earlier.

Economists had been expecting a reading of 47.3, according to Dow Jones Newswires. Though the reading topped forecasts, a figure below 50 nonetheless indicates a contraction in manufacturing activity.

The market's reaction, however, was likely not as enthusiastic as it might seem from gains by the major indexes. Volume was very light, which tends to skew price movements, and the final day of the quarter had some institutions buying more for show rather than on any conviction about the economy.

Investors also examined a government plan to overhaul the way Wall Street is regulated. Wall Street appeared unmoved by a speech from Treasury Secretary Henry Paulson on the plan to reorganize oversight of Wall Street; details of the 218-page plan have been widely reported in recent days. It would give the Federal Reserve increased power to protect the stability of the entire financial system while merging day-to-day supervision of banks into one agency, down from five under the existing system.

Scott Wren, senior equity strategist for A.G. Edwards & Sons, said Monday's trading showed investors were generally awaiting economic data due this week on the manufacturing and service sectors as well as employment. Investors are prepared for weak economic data, he said, but could become unnerved if there is unwelcome corporate news.