Stocks suffer biggest drop in nearly a month

Posted March 21, 2013, at 6:09 p.m.

NEW YORK — U.S. stocks slumped on Thursday, suffering their biggest drop in nearly a month, pressured by weak eurozone economic data, escalating worries over the banking crisis in Cyprus as well as disappointment with Oracle Corp.’s quarterly earnings.

The Dow Jones industrial average closed down 90.24 points, or 0.6 percent, at 14,421.49.

Cisco Systems Inc. and Hewlett-Packard Co. led blue-chip declines, dropping 3.8 percent and 2.6 percent, respectively. Cisco fell after FBR Capital Markets downgraded the networking-equipment maker to underperform from market perform.

The S&P 500 index shed 12.91 points, or 0.8 percent, to end at 1,545.80. The Nasdaq composite fell 31.59 points, or 1 percent, to 3,222.60.

“The Nasdaq is taking the brunt of the selling thanks to Oracle,” Elliot Spar, market strategist at Stifel Nicolaus & Co., wrote in afternoon commentary, referring to the business-software maker, whose shares fell nearly 10 percent a day after reporting profit and sales below expectations.

After an extended climb that had the S&P 500 within reach of its all-time closing high, equities were this week derailed by a controversial plan that would have taxed bank deposits in Cyprus to help finance a bailout of its banking system. The plan was rejected Tuesday by the Cypriot parliament and officials are now scrambling to put together another rescue strategy.

In a statement late Thursday, eurozone finance ministers known as the Eurogroup said they stand ready to discuss a new proposal with Cyprus, which they expect the Cyprus authorities to present as rapidly as possible.

The European Central Bank said it would suspend aid for Cyprus banks if the country can’t reach a bailout deal with international lenders by Monday.

“It sends an uncomfortable signal about how far the [European Central Bank] and the euro zone are willing to go to solve their problems,” said Nicholas Colas, ConvergEx Group chief market strategist. “All deposits are basically the same. There is no picking and choosing, at least if you want the global economy to have confidence in your currency,” he said.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, said that Cyprus crisis is important for Europe, because it could potentially lead to a bank run in the eurozone.

“Secondly, the ECB has said you have until Monday, which could lead to Cyprus being removed from the euro,” he said.

There was also bad news about the eurozone economy.

Data from Markit showed activity in Germany’s manufacturing sector unexpectedly contracted in March. The preliminary manufacturing purchasing managers’ index, or PMI, dropped to a three-month low at 48.9, sending the sector back into contraction territory.

Also, a gauge of euro-area services and manufacturing output contracted more than expected, Markit reported.

Investors largely bypassed economic reports from the U.S.

The Philadelphia Federal Reserve said manufacturing activity in the region picked up sharply in March, while the Conference Board’s leading economic index grew 0.5 percent in February, marking the third straight month of gains.

A report from the National Association of Realtors found existing-home sales up 0.8 percent in February to a seasonally adjusted annual rate of 4.98 million, its highest since November 2009.

Home prices gained 0.6 percent in January, and rose 6.5 percent from the year before, the Federal Housing Finance Agency said Thursday.

Ahead of Wall Street’s open, U.S. stock-index futures were little changed as data showed continued improvement in the U.S. labor market. Initial jobless claims climbed by 2,000 to a seasonally adjusted 336,000 last week, with the data slightly better than expected.

Wall Street snapped a three-day losing streak on Wednesday after the Federal Reserve said it would maintain its ultra-easy monetary policy, and Fed Chairman Ben Bernanke said he wasn’t yet convinced of the job market’s progress.

The Dow industrials finished Wednesday at 14,511.73, a rise of 55.91 points, or 0.4 percent, but short of a new closing record. The Standard & Poor’s 500 index finished Wednesday within 7 points of its all-time closing high of October 2007.

Distributed by MCT Information Services

 

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