Cyprus has markets seeing red again
Confusion about whether the fix for Cyprus' banking problems will be used elsewhere hits stocks. Selling prompts the dollar to move higher against the euro.
The S&P 500 hit a high of 1,564.91 shortly after 10 a.m. ET. That was less than a quarter of a point below its Oct.9, 2007 closing high of 1,565.15. But the market fell back after investors started to read the fine print of the deal -- which was basically that investors and depositors in bank bailouts will bear some of costs.
When the day was done, the Dow Jones industrials ($INDU) were off about 64 points to 14,448. The S&P 500 was off 5 points to 1,552, and the Nasdaq Composite Index ($COMPX) was down 10 points to 3,235.
The selling was prompted by Dutch Finance Minister Jeroen Dijsselbloem, who said Cyprus was a template for future rescues.
Investors translated the comment to this: Investors and holders of uninsured deposits in troubled banks will have to pay for some of the bailout costs. European bank rules insure deposits up to 100,000 euros -- about $129,000.
The more cynical translation: If you have a deposit greater than 100,000 euros in a European bank that may be troubled, get it out now. Move it before you're forced to give up some of your money and before the country in question halts your ability moving money to another, presumably safer country.
Not only did the S&P 500 fall back, but the Dow fell as many as 117 points before a rebound trimmed the day's losses. The rebound resulted when Dijsselbloem's office later said he didn't mean what he actually said to the Financial Times and to Reuters.
Yes, it sounds like meaningless sound and fury, but the fact is markets on both sides of the Atlantic moved lower on Dijsselbloem's comments and remained lower despite his wish to backtrack. There was too much uncertainty and worry that Cyprus would cause issues far beyond the size of its economy, which is about the size of Shreveport, La.
On the other hand, many believe Cyprus got what it deserved. Its second-largest bank will be liquidated and some of its assets merged with the Bank of Cyprus, the nation's biggest bank. Cyprus' banks ballooned in size because it was a convenient place for Russians to park their money. And the banks erred by lending too much money to companies in Greece.
The euro worries sent many investors looking for safety. The dollar moved higher against the euro and British pound.
Crude oil (-CL) in New York rose $1.10 to $94.81 a barrel. Brent crude was up 31 cents to $107.97. Gold (-GC) in New York fell $1.60 to 1,604.50.
Only five of the 30 Dow stocks were higher, led by Wal-Mart Stores (WMT) and UnitedHealth (UNH). In addition, only 154 S&P 500 stocks were higher, led by Apollo Group (APOL) and Cliffs Natural Resources (CLF), the iron-ore producer.
Dell (DELL), which now appears to be in an epochal takeover fight, was the top performer among the stocks in the Nasdaq-100 Index ($NDX). The index fell 11 points to 2,789, with eBay (EBAY) the laggard.
I suspect that Dijsselbloem did mean it and only recanted after superiors of some politican hit him in the head with a brick.
Whether it be Cyprus, Greece, Italy or the USA, you can not continue spending money you don't have forever, sooner or later it will hit the fan.
All this chatter, and how many times now, have the great powers declared success?
I'm not sure if we are taliing about the House of Cards or the Domino Theory, but somethings gonna happen casue it ain't over yet.
Jokers like 57 States Obozo, Gunner Biden and Big Gulp Bloomberg are just the sideshow.
Same stupid rhetoric, that we have been listening to for the past several years...
Time to get a new drum...
Yawn, here we go again. They can't fix it, the fix is in, oh crap there going to fix everything that way.
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