Benchmarks trimmed losses in the final hour of trading and ended mixed after Cyprus lawmakers declined to accept the proposed bailout plans for banks. Investor concerns about the bailout overshadowed encouraging reports from the housing sector. Both housing starts and building permits increased in the month of February. Meanwhile, the Fed’s two-day policy meeting began yesterday. The energy sector was the major loser among the S&P 500 industry groups whereas consumer staples were the biggest gainers.
The Dow Jones Industrial Average (DJI) inched up 0.03% to close the day at 14,455.82. The S&P 500 fell 0.2% to finish yesterday’s trading session at 1,548.34. The tech-laden Nasdaq Composite Index declined 0.3% to end at 3,229.10. The fear-gauge CBOE Volatility Index (VIX) increased 7.7% to settle at 14.39. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.8 billion shares, higher than 2012’s daily average of 6.45 billion shares. Declining stocks outnumbered the advancers. For the 39% that advanced, 58% declined.
The Street began yesterday’s trading session on a positive note following positive numbers from the housing sector. But benchmarks slipped into the red in the noon as investors were eyeing the outcome of Cyprus lawmakers’ vote on the plan proposed by the country’s lenders. Benchmarks trimmed losses after Cyprus lawmakers rejected the proposal. Only the Dow Jones managed to finish in the green.
Markets have enjoyed a decent rally this year but news about Cyprus’ financial crisis has put the brakes on gains. The country’s lenders had put forward a bailout proposal which entailed imposing tax on banks deposits in Cyprus. But not a single vote was received in favor of the proposal. The chairman of the parliamentary finance committee Nicholas Papadopoulos said banks will not operate “for as long as we need to conclude an agreement” but emphasized this would occur “in the next few days.”
According to the deal struck previously, bank deposits lower than 100,000 Euros would be taxed at 6.7%, while deposits above that level would be taxed at 9.9%. However, Euro Zone finance ministers are in favor of a tax of 15.6% on deposits above 100,000 Euros.
On the domestic front, the U.S. Census Bureau and the Department of Housing and Urban Development jointly announced building permits and housing starts numbers. According to the report, privately owned housing starts in February came in at 917,000 from the previous month’s revised figure of 910,000. This was slightly below the consensus estimate of 918,000. Housing starts increased at the second fastest rate since June 2008. Building permits came in at 946,000 in February from January’s revised figure of 904,000.
Investors will also closely watch the outcome of the Federal Reserve’s meeting which began yesterday. This is the Fed’s second policy meeting of the year. Investors and analysts are not expecting any changes in monetary policy. Markets have had a decent rally this year driven primarily by the Federal Reserve’s attempts to keep interest rates at a record low.
The Consumer Staples Select Sect. SPDR (XLP) gained 0.8%. This sector was the biggest gainer among the S&P 500 industry groups. Stocks such as The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), Wal-Mart Stores, Inc. (NYSE:WMT), Altria Group Inc (NYSE:MO) and Colgate-Palmolive Company (NYSE:CL) added 1.3%, 1.5%, 0.3%, 0.7% and 0.3%, respectively.
Energy stocks were the major losers among the S&P 500 industry groups and the Energy Select Sector SPDR (XLE) lost 1.1%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Hess Corp. (NYSE:HES), Suncor Energy Inc. (NYSE:SU), Petroleo Brasileiro Petrobras SA (NYSE:PBR) and Marathon Oil Corporation (NYSE:MRO) fell 0.2%, 3.1%, 0.6%, 1.4% and 2.9%, respectively.