U.S. stocks declined Monday, erasing gains that briefly had the S&P 500 index less than one point from its record close, as Wall Street worried about Europe’s troubles.
Stocks had initially rallied as a deal was reached to avert a financial meltdown in Cyprus. But equities retreated as investors questioned what the plan for bank restructuring in the island nation would mean for other European countries.
“This is just a reality check. The initial euphoria was Cyprus at least didn’t sink into the Mediterranean Sea. But, as you dive in further, you realize Europe still does have significant issues to resolve,” said Ron Florance, managing director of investment strategy at Wells Fargo Private Bank.
After coming within a fraction of its all-time closing high of 1,565.15, hit in October 2007, the S&P 500 ended at 1,551.69, off 5.20 points, or 0.3% on Monday.
The S&P 500 initial nearing of its all-time closing high is “much more of a Main Street story than a Wall Street story, as we’ve been watching this from 2009,” said Art Hogan, market strategist at Lazard Capital Markets, referring to the bull market that started a fifth year in March. The index has more than doubled from its 2009 bottom.
Industrials and materials were the worst performing of the S&P’s 10 major sectors, all of which lost ground.
Dell Inc. shares gained 2.6% after the computer maker confirmed it received competing bids from private-equity firm Blackstone Group LP and billionaire investor Carl Icahn that could top one offered by founder Michael Dell.
Best Buy Co Inc. advanced 1.8% after the consumer-electronics retailer said founder Richard Schulze would return as chairman emeritus, offsetting talk that its largest investor was considering selling his stake in the company.
After rising as much as 51 points and then falling 117 points, the Dow Jones Industrial Average declined 64.28 points, or 0.4%, to end at 14,447.75.
The Nasdaq Composite dropped 9.70 points, or 0.3%, to 3,235.30.
For every two stocks that rose, three fell on the New York Stock Exchange, where 655 million shares traded.
Composite volume approached 3.2 billion.
The euro fell, along with U.S. and European equities, after Dutch Finance Minister Jeroen Dijsselbloem suggested to Reuters and the Financial Times that a depositor bail-in, the most controversial aspect of the Cyprus rescue, could be repeated among others in the 17-member euro zone. His office later dialed back his comments.
slid to $1.2855 after rising as high as $1.3048 in Asian trade on Monday.
Cyprus and international lenders struck a last-minute bailout deal early Monday, clearing the way for the euro area’s third-smallest economy to receive 10 billion euros ($13 billion) in financing. The agreement calls for a restructuring of two of the island country’s largest banks — Popular Bank of Cyprus (also known as “Laiki Bank”) and Bank of Cyprus — as well as a downsizing of the nation’s overall banking sector.
Deposits at both banks larger than €100,000, the cutoff between insured and uninsured deposits, will be subject to a levy.
“We were having too much of a celebration over the near-term success of fixing the Cyprus problem, but the devil is in the details, and the details are still coming out,” said Hogan. “The good news is disaster has been avoided; the bad news is the knock-on effect,” he said.
In a speech Monday afternoon in New York, Federal Reserve Bank of New York President William Dudley said the Fed’s monetary policy should remain “very accommodative” to give the labor market more time to strengthen. Dudley also said the Fed must press ahead with its bond-buying program as Congress is going about fiscal policy the wrong way.
“If you are worried about the Fed ending asset purchases early, you would need an outlook shift from Fed members such as Dudley. At least today, no such shift was seen,” noted Dan Greenhaus, chief global strategist at BTIG LLC, in emailed commentary.
In Britain, Fed Chairman Ben Bernanke told the London School of Economics that low interest rates in developed countries help the global economy while not disrupting trade via weaker currencies.