U.S. Stocks Fall on Europe Concern as Cyprus Rejects LevyLu Wang and Sarah Pringle
U.S. stocks fell, sending the Standard & Poor’s 500 Index to its longest slump of the year, as Cypriot lawmakers’ rejection of a bank levy overshadowed data showing growth in new-home construction.
Cliffs Natural Resources Inc. tumbled 6.6 percent as Goldman Sachs Group Inc. cut its forecast for iron-ore prices. Electronic Arts Inc. slumped 8.3 percent after the video-game maker ousted its chief executive officer. Cardinal Health Inc. fell 8.2 percent after saying its contract with Walgreen Co. won’t be renewed. Walgreen rose 5.4 percent and AmerisourceBergen Corp. surged 3.6 percent after agreeing to a partnership.
The S&P 500 fell 0.2 percent to 1,548.34 at 4 p.m. in New York, after dropping as much as 0.9 percent earlier. The gauge lost 1 percent over three days, the longest streak since Dec. 28. The Dow Jones Industrial Average added 3.76 points, or less than 0.1 percent, to 14,455.82. About 6.8 billion shares traded hands on U.S. exchanges today, or 7.4 percent above the three-month average.
“Obviously the situation in Europe is not what we want it to be,” John Manley, who helps oversee about $223.6 billion as chief equity strategist for Wells Fargo Advantage Funds in New York, said in a phone interview. “The next couple weeks will be more periods of chopping around. I don’t think it’s more than 2 to 4 percent in terms of risk on the market,” he said. “The housing market does seem to be on a bit more steady ground and that helps U.S. consumers.”
Stocks fell as Cyprus’s parliament rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force savers to shoulder part of the country’s bailout in a standoff that risks renewed tumult in the euro area. Hammered out by euro-area finance chiefs at the weekend, the deal had sought to raise 5.8 billion euros ($7.5 billion) by drawing funds from Cyprus bank accounts in return for 10 billion euros in international aid.
Equities trimmed losses late in the trading day after the European Central Bank reaffirmed its commitment to provide liquidity “as needed within the existing rules.”
The S&P 500 rose earlier as a Commerce Department report showed builders broke ground on 917,000 homes at an annual rate, up 0.8 percent from a revised 910,000 pace in January that was higher than initially estimated. Building permits, a proxy for future construction, advanced 4.6 percent to 946,000, the strongest since June 2008.
The bull market in U.S. equities entered its fifth year this month. The S&P 500 has more than doubled from its bottom in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases by the Fed. The S&P 500 rose to within two points of its 2007 record last week while the Dow reached an all-time high.
The Federal Open Market Committee began a two-day meeting today. The policy makers agreed in December to link record-low interest rates to thresholds for unemployment and inflation so that investors and households know what conditions will prompt the Federal Reserve to consider raising rates.
The push by Fed Chairman Ben S. Bernanke to continue record stimulus faltered with the Jan. 3 release of minutes from the FOMC’s December meeting, which said several officials favored slowing or stopping bond buying well before the end of 2013.
“I don’t think there is any mystery at all,” Christopher Beck, senior vice president at Delaware Investments, said in a phone interview. His firm had more than $179 billion under management as of as of Dec. 31. “The Fed is not going to change the tone. They’re going to confirm the easing bias.”
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, jumped 7.7 percent to 14.39 today, after surging 18 percent yesterday. The gauge, known as the VIX, is down 20 percent this year.
Six out of 10 S&P 500 groups retreated as energy, consumer-discretionary and financial companies fell the most, sinking at least 0.5 percent.
Cliffs Natural Resources Inc., the biggest U.S. iron ore producer, tumbled 6.6 percent to $20.33. Goldman Sachs trimmed its price forecast on the commodity, citing seaborne expansion projects and increasing production in China.
Chesapeake Energy Corp. slumped 5.1 percent to $21.04. Freeport-McMoRan Copper & Gold Inc., the world’s second largest copper miner, slid 1.6 percent to $32.98.
Electronic Arts dropped 8.3 percent to $17.15. The second-largest U.S. maker of video games said John Riccitiello is stepping down as chief executive officer and warned quarterly results may fall short of forecasts.
Juniper Networks Inc. fell 5.3 percent to $19.14. Goldman Sachs downgraded the No. 2 maker of networking gear to sell from neutral, citing competition from Cisco Systems Inc. and Alcatel-Lucent.
Cardinal dropped 8.2 percent to $42.35 after saying its pharmaceutical distribution contract with Walgreen won’t be renewed after it expires in August. Walgreen accounted for about 21 percent of Cardinal’s revenue in 2012.
Walgreen, the largest U.S. drugstore chain, and Alliance Boots GmbH agreed to a long-term partnership with AmerisourceBergen, gaining the right to acquire a minority stake in the pharmaceutical services provider. Walgreen also reported second-quarter earnings that topped analysts’ estimates.
AmerisourceBergen surged 3.6 percent to $50.06 and Walgreen rallied 5.4 percent to $44.74.
EBay Inc. climbed 2 percent to $51.10. The operator of the world’s largest online marketplace is overhauling fees for sellers for the first time since 2010, seeking to reduce costs and make pricing less complicated as it competes with bigger rival Amazon.com Inc. for online merchants.