By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks halved Monday losses as
Wall Street weighed conflicting accounts from Europe, where one
report about the fix for Cyprus offering a road map for others was
disputed.
Wall Street's drop erased gains that briefly put the S&P 500
Index less than 1 point from its record close, as investors worried
that the plan for bank restructuring in Cyprus would lead to
deposits taking a hit in other European countries.
Equities came off their lows, however, after the president of
the Eurogroup, Jeroen Dijsselbloem, tried to clarify his comments
on the rescue.
"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 (SPX) was lately off
4.38 points, or 0.3%, at 1,552.51.
Materials fell the hardest and consumer staples 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 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.
After rising as much as 51 points and then falling 117 points,
the Dow Jones Industrial Average (DJI) was more recently down 53.40
points, or 0.4%, to 14,458.63.
The Nasdaq Composite (RIXF) dropped 7 points, or 0.2%, to
3,238.
For every three stocks that rose, more than four fell on the New
York Stock Exchange, where 367 million shares traded by 2:35 p.m.
Eastern.
Composite volume approached 2.2 billion.
The eurofell, along with U.S. and European equities in the wake
of the Dijsselbloem remarks reported by Reuters. The euro (EURUSD)
slumped to $1.2862 after rising as high as $1.3048 in Asian trade
on Monday.
Dijsselbloem issued a statement saying that "macro-economic
adjustment programs are tailor-made to the situation of the country
concerned and no models or templates are used." Earlier Monday,
Dijsselbloem made comments in an interview suggesting that the
bailout for Cyprus will serve as a template in future euro-zone
negotiations.
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, 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.
Dell (DELL) shares gained 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.
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.
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