Wall St. retreats, Euro heads for record quarterly drop

NEW YORK (Reuters) - U.S. stocks retreated on Tuesday following the previous session's rally, though major indexes were headed for a positive first quarter, while monetary policy changes and worries about Greece put the euro on track for its biggest quarterly fall.

Investors are betting that the U.S. Federal Reserve will raise interest rates this year, boosting the dollar. But the European Central Bank has launched a one-trillion-euro economic stimulus program, which has put the euro under pressure.

The currency was down 0.7 percent against the dollar while the greenback <.DXY> was on track for its biggest quarterly rise against the world's top six currencies <.DXY> since 2008.

U.S. stocks were helped by two days of corporate takeover announcements, including several biotech deals on Monday and Charter Communications' plan to buy Bright House Networks for roughly $10 billion.

But they were not enough to boost equities. The Dow Jones industrial average <.DJI> was down 84.78 points, or 0.47 percent, at 17,891.53. The Standard & Poor's 500 Index <.SPX> was down 7.20 points, or 0.35 percent, at 2,079.04. The Nasdaq Composite Index <.IXIC> was down 20.50 points, or 0.41 percent, at 4,926.94.

"This has been a good quarter and we had a good move yesterday. I think a lot of people want to take some profits heading into the new quarter and ahead of Friday's jobs report and the upcoming earnings season," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

The benchmark S&P 500 and the Nasdaq indices were both on track to end the first quarter with ninth straight quarterly advances, the longest such streak for the S&P since 1998 and the longest in Nasdaq's history.

Despite that, all three major indices were headed for March declines.

U.S. Treasury debt prices rose, getting a lift from buying by institutional investors preparing their portfolios for the end of the quarter. The benchmark 10-year U.S. Treasury note was up 7/32, the yield at 1.9353 percent.

The pan-European FTSEurofirst 300 <.FTEU3> index dipped 0.7 percent as traders squared up for the quarter end.

Greece's debt negotiations have made investors uneasy on both sides of the Atlantic. German Chancellor Angela Merkel said on Monday that Athens had a certain degree of flexibility on which reforms to implement but stressed that they must "add up."

Greece's leader Alexis Tsipras responded by appealing for an "honest compromise" but warned he would not agree to unconditional demands.

Oil took a slide on prospects that OPEC member Iran could reach a deal on its nuclear program that could allow Tehran to sell more of its oil onto an already saturated market. [O/R]

U.S. crude was last down 0.43 percent at $48.47 per barrel while Brent fell 0.6 percent to $55.69.

(Additional reporting by Caroline Valetkevitch in New York; Editing by Catherine Evans, Susan Fenton, James Dalgleish and Dan Grebler)

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