Wall Street up on data, regulatory plan, but down for quarter

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks gained on Monday as a report showing stronger-than-expected Midwestern business activity eased worries about the economy and a plan for regulatory overhaul raised hopes for calmer financial markets.

Even though the market posted gains on the last day of the first quarter, it had its worst quarterly performance in 5-1/2 years with the U.S. economy showing signs of tipping into recession as the worsening credit crisis claimed ever-larger victims. On the month, the broader market posted its fifth monthly loss.

In after-hours trade, Lehman Brothers Holdings Inc stirred fresh worries about financial stocks when the Wall Street investment bank unveiled a plan to raise as much as $3 billion in capital to bolster its balance sheet. After the closing bell, Lehman's stock dropped 6.3 percent to $35.26 from its NYSE close at $37.64.

During the regular session, a key barometer of manufacturing growth offered a glimmer of hope after a steady diet of dismal economic news. The National Association of Purchasing Management-Chicago index, also known as the Chicago PMI, showed business activity in the Midwest was still shrinking, but the data was not as bad as some had feared.

A plan to revamp U.S. market regulation, unveiled by Treasury Secretary Henry Paulson, also brought a measure of optimism as it signaled the government was addressing issues that led to the current turmoil.

Industrial and telecommunications stocks led the advance, with conglomerate General Electric Co rising 1.1 percent to $37.01. Financials also gained, with an S&P index of financial shares up 0.9 percent.

"It is a function of the last day and window dressing, but it is being buttressed by the sense that there's going to be this massive realignment of regulation for the markets, which I think most participants would agree is long overdue," said Peter Kenny, managing director at Knight Equity Markets in Jersey City in New Jersey.

The Dow Jones industrial average rose 46.49 points, or 0.38 percent, to end at 12,262.89. The Standard & Poor's 500 Index advanced 7.48 points, or 0.57 percent, to 1,322.70. The Nasdaq Composite Index climbed 17.92 points, or 0.79 percent, to close at 2,279.10.