By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks declined Monday, erasing
gains that briefly put the S&P 500 Index less than 1 point from
its record high, after a key euro-zone official suggested that the
Cyprus bailout deal could be used as a template for other countries
that may need aid.
Dutch Finance Minister Jeroen Dijsselbloem, chairman of the
Eurogroup of euro-zone finance ministers, reportedly said the
rescue of Cyprus offers a new template for addressing trouble in
the euro area.
The euro (EURUSD) fell, along with U.S. and European equities in
the wake of the remarks reported by Reuters.
The main concern is that the Cyprus deal includes a tax on some
bank deposits -- an unprecedented step that could potentially
trigger bank runs.
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 EUR100,000 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 Art Hogan,
market strategist at Lazard Capital Markets. "The good news is
disaster has been avoided; the bad news is the knock-on effect," he
said.
After coming within a fraction of its all-time closing high of
1,565.15, hit in October 2007, the S&P 500 (SPX) was lately off
9.35 points, or 0.6%, at 1,547.54.
Industrials fell the hardest and telecommunications fared best
among the S&P's 10 major sectors.
The S&P 500 nearing 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 Hogan, referring to the bull market
that started a fifth year in March, with the S&P 500 having
more than doubled from its bottom in 2009.
After rising as much as 51 points and falling 117 points, the
Dow Jones Industrial Average (DJI) was more recently down 108.43
points, or 0.8%, to 14,403.60.
The Nasdaq Composite (RIXF) dropped 19.82 points, or 0.6%, to
3,225.18.
For every three stocks that rose, more than four fell on the New
York Stock Exchange, where 22.50 million shares traded by 1:15 p.m.
Eastern.
Composite volume topped 1.7 billion.
The euro(EURUSD) slumped to $1.2835 after rising as high as
$1.3048 in Asian trade on Monday.
Dell (DELL) shares gained 2.7% 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.
And, in a prepared speech for delivery 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, sho such sift was seen," noted Dan Greenhaus, chief
global strategist at BTIG LLC, in emailed commentary.
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