Stocks Tumble as Deadlock in Cyprus Threatens to Worsen Eurozone Debt Crisis
NEW YORK ( TheStreet) -- U.S. stocks headed for a third day of losses Tuesday as Cyprus failed to reach a deal to recapitalize its banks, heightening investor concern that the Eurozone debt crisis may worsen and eclipsing stronger U.S. housing market data for February.
The S&P 500 was retreating 0.82% to 1,539.11 after two sessions in the red. The Nasdaq fell 1% to 3,206.49.
The Dow Jones Industrial Average was falling 62.94 points, or 0.44%, to 14,389.12 after logging its largest two-day point and percentage decline since Feb. 26.
Concern grew that a full-blown Eurozone financial crisis could be in the offing if legislators in the tiny and indebted country of Cyprus are unable to reach an agreement to rescue their banks. Eurozone officials on Saturday asked the government to implement a plan to tax all bank accounts with the goal of helping to raise €10 billion in rescue funds for the island-nation.
Euro zone officials were reportedly planning to reject the measures and instead opt for a higher tax on bank deposits above €500,000.
Reflecting the challenges of reaching a deal, Cypriot Finance Minister Michalis Sarris offered to resign, an overture that Cypriot President Nicos Anastasiades then rejected.
The European proposal to tax bank accounts could run into opposition from the Russian government along with Cypriots unhappy about a tax proposed by Brussels to sustain the country's banks.
"This would be particularly unpopular with the Russian Government, which might then refuse to extend the maturity of an earlier loan granted to Cyprus," Jennifer McKeown, senior European economist at Capital Economics in London commented in a note.
The FTSE 100 in London fell 0.26% and the DAX in Germany slumped 0.79%.
The benchmark 10-year Treasury surged by 14/32, diluting the yield to 1.909%. The dollar was up 0.44%, according to the U.S. dollar index.
Gold front month contracts for April were popping $8.80 to $1613.40 an ounce at the Comex division of the New York Mercantile Exchange.
The U.S. Census Bureau reported today that housing starts, or new home constructions, rose to a seasonally adjusted annual rate of 917,000 in February from an upwardly revised 910,000 in January. Economists were expecting an increase to 915,000.
The bureau said building permits, a proxy for future construction, increased to a 946,000 annual rate, compared to the predicted rise to a 925,000 rate. The prior month's figure was downwardly revised to a 904,000 pace.
The Federal Reserve begins its two-day policy meeting Tuesday and is scheduled to announce its latest policy stance at 2 p.m. the following day. Fed Chairman Ben Bernanke will hold a press conference at 2:30 p.m. on Wednesday.
AmerisourceBergen Corp (ABC) shares were jumping 5.1% to $50.77 Tuesday after the drug wholesaler announced a 10-year pharmaceutical distribution agreement with Walgreen(WAG) , the U.S.'s largest drugstore chain, and Walgreen affiliate and European drug wholesaler Alliance Boots. The deal also gives the companies rights to acquire a minority stake in AmerisourceBergen of up to 23%.