Markets see-sawed back and forth and shed a chunk of their quarterly gains when the subprime mortgage meltdown and inflationary fears blew through March to close our session and the quarter ended March 30, 2007. Although the Fed held steady when they met to discuss interest rates, Fed chief Ben Bernanke warned Wall Street after its brief rally following the Federal Open Market Committee session that inflationary concerns were very real. Reports issued at month’s end that consumer spending and incomes were up, fueled in part by increases in energy costs, did little to ease those concerns. “The news on inflation was not comforting,” said Nigel Gault, an economist at Global Insight. “So despite poor recent news on the housing market and business investment spending, the Fed cannot yet contemplate cutting interest rates.”

The PCI Manufacturers’ Index showed nary a worry as it rose a healthy 74.54 points, or 6.04 percent to end at 1308.77. Akzo Nobel and BASF carried most of the load this session: despite the index’s strong showing, declining issues outpaced advancing issues at a 6-to-4 count.

Heavy-lifter Akzo Nobel zoomed up 12.57 points and closed at 75.92 after word that Schering-Plough will buy the company’s pharmaceutical division for $14.4 billion. The deal is expected to close by the end of the year. Azko Nobel CEO Hans Wijers said in a conference call that the company is considering other options to strengthen its place in the chemicals and coatings sector, such as acquisitions and greenfield investments. “Any transaction that makes strategic sense and that creates long-term value will be considered,” Wijers said. Akzo Nobel increased 19.84 percent, and was the top percentage gainer this session.

Shares of Masco crumbled after the CEO said in an investor call that unemployment in the sector will rise because of the sagging housing market. “I think things are worse than you’ve seen,” said Masco Chairman and CEO Richard Manoogian. “I think you’re going to see a pickup in unemployment rates and I think that’s going to have a positive impact on commodity costs, positive impact on interest rates, because I think the Federal Reserve will act once they see how the economy is softening.” Manoogian, whose company produces Behr paint, among other home improvement products, emphasized Masco’s reflection of the broader economy. “We’re one company and we’re laying off 8,000 people,” Manoogian said. “You multiply us times many other companies in our industry, you get to appliance people and furniture people. I think you will see a little bit bigger ripple effect in the economy than most people expect.” Masco shed 4.59 points, or 14.35 percent, and was the top dollar and percentage loser this session. Masco closed at 27.40.

BASF jumped 15.65 points or 16.17 percent after the company reported a 31 percent increase in its chemicals division and bested analysts’ forecasts for the quarter. BASF earned €732 million, or $962 million, compared to €560 in the year-ago quarter. Analysts surveyed by Dow Jones Newswires said BASF would earn €680 million in the quarter. The company said its earnings were boosted by acquisitions such as U.S. catalyst maker Engelhard Corp. BASF closed at 112.42, and was the top dollar gainer.