U.S. stocks on Monday fell for a second session as Europe’s efforts to get a handle on a rescue of Cyprus provided enough uncertainty for a much-anticipated retreat on Wall Street.
“For U.S. investors, we’ve seen this movie before. We start out strong, and then sometime in the spring, something in Europe screws things up,” said Dan Greenhaus, chief global strategist at BTIG LLC.
“People have been looking for a reason to selloff for the last 3%, myself included,” said Greenhaus of Wall Street’s extended advance, which has the S&P 500 up 8.8% so far this year.
U.S. equities fell hard at the start on a euro-zone proposal to tax Cypriot bank deposits in order to cut the cost of a rescue of the island nation.
After a 109-point fall, the Dow Jones Industrial Average recovered nearly all of those losses only to resume its downward spiral amid conflicting reports on Cyprus.
The Dow ended at 14,452.06, down 62.05 points, or 0.4%, with Boeing Co. and J.P. Morgan Chase & Co. leading the losses that included all but eight of its 30 components.
The S&P 500 index shed 8.06 points, or 0.6%, to 1,552.10. Financial companies led declines among the index’s 10 industry sectors, while telecommunications was the best performer.
J.C. Penney Co. Inc. shares rallied after upbeat comments from an Oppenheimer analyst and as an analyst at ISI Group said the retailer could transform its 300 stores into something akin to a real-estate investment trust that could lease space to others.
The Nasdaq Composite fell 11.48 points, or 0.4%, to 3,237.59.
For every share that rose, nearly two fell on the New York Stock Exchange, where 302 million shares traded.
Composite volume neared 3.2 billion.
Ahead of Wall Street’s open, global markets were jolted by news that Cyprus will receive 10 billion euros ($12.9 billion) of financial aid but with heavy conditions — notably the imposition of a levy on private bank deposits. It’s the first time depositors have been asked to contribute to a financial-rescue plan during the long-running euro-zone debt crisis.
initially set for Monday on the levy proposed by euro-zone finance ministers was delayed, but there were conflicting reports late Monday.
“The prime minister came out and said he didn’t have the votes to pass the bank tax, and that pretty much marked the top” for the market, said Greenhaus.
“Cyprus is just a tiny speck of country relative to all the goings on in Europe, but it is really opening the door to taxing deposits that has everybody concerned,” Paul Nolte, managing director at Dearborn Partners in Chicago, said of worries the levy could be used in larger European economies, such as Spain and Italy.
“Cyprus is really the only focus today, but because the market is ADD [Attention Deficit Discorder], that will be different tomorrow,” Nolte added.
slumped against the dollar to $1.2970 as investors also bought U.S. Treasurys, pushing down the yield of the benchmark 10-year note to 1.962%.
Wall Street offered little reaction as a measure of sentiment among U.S. home builders unexpectedly declined for a second month in March. The National Association of Home Builders/Wells Fargo index of builder confidence fell by 2 points to 44 this month.
“We’ve seen very good gains from very low levels. It’s not the end of the world, nor the end of a trend, I don’t think, but worthy of taking note,” said Nolte.