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Futures flat as market concludes grim quarter

NEW YORK - U.S. stock index futures pointed to a flat open on Monday as the market looked set to end its worst quarter in 5 1/2 years and the outlook for corporate profits grew bleaker.

The pharmaceutical sector weighed on the market as shares of drug makers Schering Plough Corp and Merck & Co fell before the bell after an expert panel recommended patients try cheaper cholesterol drugs before using the two companies’ jointly developed medicines, Vytorin and Zetia. For details, see ID:nN31364249.

Shares of Merck were down 12.3 percent at $39.05 and Schering stock sank 22.1 percent to $15.15. Lehman Brothers downgraded Schering and cut its price target on Merck.

Data compiled by Reuters Estimates showed Wall Street analysts have further reduced their forecasts for first-quarter earnings for S&P 500 companies. Earnings are now expected to fall 8.1 percent in the first quarter compared with a 5.5 percent decline projected last week.

The global credit crisis has significantly damaged the outlook for many major U.S. companies, particularly in the financial sector.

“This has been torture, this has been a real dismal quarter,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany. “As we start the second quarter, you have to play defense. The key piece of the puzzle is earnings and when will the earnings of financials turn around.”

S&P 500 futures were down 2.4 points but above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures fell 40 points, and Nasdaq 100 futures were up 3.25 points.

Several indicators measuring business activity are on tap for Monday, including the March reading of the New York NAPM index due at 9 a.m. (1300 GMT) and the Chicago PMI, also for March, at 9:45 a.m. (1345 GMT).

Treasury Secretary Henry Paulson is set to unveil plans for streamlining financial market regulation at 10 a.m. (1400 GMT). ID:nL3137839.

Heading into the quarter’s final session, the Dow is down 7.9 percent, the S&P 500 is down 10.4 percent and the Nasdaq has lost 14.8 percent. For all three benchmarks, it’s the worst quarterly performance since the third quarter of 2002.

Shares of IAC/InterActiveCorp rose 8.3 percent after the closing bell on Friday after a court ruled in favor of Barry Diller, its chief executive, in a legal dispute with controlling shareholder Liberty Media Corp. The ruling opens the way for a proposed spin-off of four company units.