The stock market lost ground Monday as investors worried that a proposal to seize money from bank depositors in Cyprus could cause more anxiety over the fate of the euro, Europe’s shared currency.
The Dow Jones industrial average fell 62.05 points, or 0.4 percent, to close at 14,452.06 Monday. It plunged as much as 110 points early, briefly turned positive in the afternoon, then fell again in the last hour of trading.
The Standard Poor’s 500-stock index fell 8.60 points, or 0.6 percent, to 1,552.10, moving further from its high of 1,565.15, set in 2007. The Nasdaq composite index dropped 11.48 points, or 0.4 percent, to 3,237.59.
European markets recovered most of an early decline and closed with modest losses. Yields on government bonds issued by Spain and Italy edged up, and the euro fell to a three-month low against the dollar.
The market rally that has pushed the Dow to record levels this year has been punctuated by concerns about the euro zone’s lingering debt crisis.
“Europe has got problems,” said Uri Landesman, president of the hedge fund Platinum Partners. “You could get more stuff like this, and the market isn’t priced to handle that.”
Cyprus reached an agreement last weekend with its European partners for its government to raid bank accounts as part of a 15.8 billion-euro ($20.7 billion) financial bailout, the first time in the euro zone crisis that the prospect of seizing individuals’ savings has been raised. The measures are stoking fears of bank runs in the other 16 nations that use the euro.
Cypriot authorities, facing an uproar, delayed a parliamentary vote on the seizure and ordered the country’s banks to remain closed until Thursday while they try to modify the deal to lessen its impact on small depositors.
Markets in Europe and Asia also fell during early trading, before retracing some of their losses later in the day. Germany’s DAX index dropped 0.4 percent and Spain’s main stock index shed 1.3 percent. Indexes in Britain and France each lost 0.5 percent.
The American stock market’s reaction to euro zone developments has eased over time.
The Dow slumped more than 8 percent last year from May 1 to June 1 on concerns that Spain and Italy would be dragged into Europe’s debt crisis. While the Dow initially dropped last month in reaction to the unsettled Italian election results, which threw the country into political paralysis, it has since gained 4.6 percent. Likewise the market recovered much of the early loss on Monday prompted by the Cyprus bailout deal.
Even with the stock market’s pullback Friday and Monday, the Dow is still up 10.3 percent this year, while the S. P. 500 is up 8.8 percent.
The stock market’s resilience suggests that traders consider the Cyprus situation to be contained for now, said Quincy Krosby, a market strategist for Prudential. The threat of rising volatility may also deter the Fed from thinking about ending its economic stimulus program. The central bank starts its second two-day policy meeting of the year Tuesday.
“Absent the Cyprus flare-up, the markets were slowing a bit and it looked as if investors were digesting the gains and waiting for the next catalyst,” Ms. Krosby said.
Financial stocks were among the biggest decliners in the S. P. 500. Morgan Stanley fell 60 cents, or 2.5 percent, to $22.99. Citigroup dropped $1.02, or 2.2 percent, to $46.24.
Goldman Sachs said Monday that it had lifted its year-end target for the S. P. 500 to 1,625 from 1,575. The investment bank is forecasting that the United States economy will grow 2 percent this year and 2.9 percent next year. It also is predicting increases in corporate deals and dividend payments.
Deutsche Bank also said Monday that it was lifting its year-end prediction for the S. P. 500 to 1,625 from 1,600, forecasting an upturn in business spending.
In the bond market in the United States, interest rates slipped. The price of the Treasury’s 10-year note rose 10/32, to 100 13/32, while its yield fell to 1.96 percent from 1.99 percent as investors moved into low-risk investments.
Article source: http://www.nytimes.com/2013/03/19/business/daily-stock-market-activity.html?partner=rss&emc=rss
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