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Markets lost out on their initial gains and the S&P 500 dropped from its four-year high as investors chose to book profits on Tuesday. Markets had rallied in the first hour lifted by hopes of the ECB plunging into action to buy back Italian and Spanish bonds. However, investors hurried to encash the uptrend and booked their profits. Eventually, markets ended in the red. Also, tech bellwether Apple closed lower a day after it became the world’s most valuable company ever.

The Dow Jones Industrial Average (DJI) dropped 0.5% and closed at 13,203.58. The Standard & Poor 500 (S&P 500) lost 0.4% and finished yesterday’s trading session at 1,413.17. The tech-laden Nasdaq Composite Index ended at 3,067.26, dropping 0.3%. The fear-gauge CBOE Volatility Index (VIX) gained 7.1% and settled at 15.02. The VIX has now rebounded from its five-year low that it achieved last week. The Street continued with its low volumes and total volumes on the New York Stock Exchange was 3.29 billion shares. Decliners outpaced the advancing stocks on the NYSE; as for 53% stocks that declined, 42% stocks closed in the green.

Investors were buoyed by the fact that markets were trending higher in the first hour of trading. The Dow had risen as much as 59 points, before it lost steam. More importantly, the S&P 500 had hit an intra-day high of 1,426.68, the highest level since May 2008. However, investors’ decision to book profits reversed the markets’ uptrend, which in turn was boosted by hopes of the European Central Bank was Staking steps to buy back the bonds of troubled nations.

Investors gained confidence following media reports that the ECB was taking concrete steps towards Italian and Spanish bond purchases. The news sparked off a rally in the European markets and the ripple effect spread to the US, at least till the end of the first hour. Over the past few days, investors have been puzzled over whether the ECB intends to go ahead with its decision on bond purchases. Last week, German Chancellor Angela Merkel said all efforts would be taken to help the European Central Bank tackle the region’s debt crisis. Merkel had said: “We feel committed to do everything we can in order to maintain the common currency”. However, this was followed by a contradictory view by Bundesbank, which opposed European Central Bank’s (ECB) idea of bond purchases. However, recently Germany’s central bank noted: "The Bundesbank remains critical of the purchase of euro system sovereign bonds, which comes with considerable risks for stability".

Coming back to yesterday’s developments, Apple Inc. (NASDAQ:AAPL) dropped 1.4% yesterday to settle at $656.06 a share. The drop in Apple shares comes after just after a day when with a market value of $623 billion, the iPhone and iPad maker broke an earlier record set by Microsoft Corporation (NASDAQ:MSFT) to become the world’s most valuable company ever. The technology sector as a whole also suffered yesterday and was one of the biggest laggards among the 10 S&P 500 industry groups. Technology Select Sector SPDR (XLK) was down 0.7%. Among the stocks, Google Inc (NASDAQ:GOOG), International Business Machines Corp. (NYSE:IBM), Hewlett-Packard Company (NYSE:HPQ), Dell Inc. (NASDAQ:DELL), Juniper Networks, Inc. (NYSE:JNPR) and Ciena Corporation (NASDAQ:CIEN) dropped 0.9%, 0.9%, 0.8%, 1.8%, 0.7% and 0.3%, respectively.

While most of the sectors ended in the red, the financial sector was lucky to finish in the green. Financial Select Sector SPDR (XLF) added 0.3% and stocks including JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C), Morgan Stanley (NYSE:MS), UBS AG (USA) (NYSE:UBS) and Deutsche Bank AG (USA) (NYSE:DB) jumped 1.8%, 2.5%, 0.4%, 2.7% and 4.2%, respectively.

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