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U.S. stocks drop as markets respond to ongoing euro zone fiscal turmoil

TradingPub Admin | March 19, 2013

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A perfect example of news that makes investors nervous and triggers their risk-off trading is the recent decision by the parliament of Cyprus to decline the proposed levy on bank deposits in exchange for further bailout funding. 

Falling stocks
The benchmark S&P 500 Index had a rough day, closing down 0.2 percent at 1,548.34 at 4 p.m. in New York, according to Bloomberg. The group of stocks dropped as much as 0.9 percent earlier in the day. The tech-heavy Nasdaq was slightly lower, losing 0.26 percent to finish the day at 3,229.09. 

The Dow Jones Industrial Average managed to barely eke out a gain, closing up 0.03 percent at 14,455.82, the media outlet reports. A total of 6.8 billion shares were traded on exchanges during the day, which is 7.4 percent higher than the three-month average. 

Cyprus vote
Hugh Anderson, managing director of Las Vegas-based HighTower Advisors, told Reuters that the Cyprus vote, and the fact that it made the outcome of the current euro zone fiscal challenges more ambiguous, helped drive the movements in equity markets. 

"Stronger nations have been willing to backstop the weaker ones, but there seems to be a limited supply of patience," he stated. Anderson predicted that after the robust surge the S&P 500 experienced in 2012, "the market is ready for a reasonable correction." 

He said that the sharp change in the markets that he is projecting may be the result of an "unforeseen catalyst," the media outlet reports. 

"Obviously the situation in Europe is not what we want it to be," John Manley, who contributes to the management of around $223.6 billion as chief equity strategist for Wells Fargo Advantage Funds in New York, told Bloomberg during a phone interview. "The next couple weeks will be more periods of chopping around. I don't think it's more than 2 to 4 percent in terms of risk on the market." 

Housing data
Markets responded to Census Bureau data indicating that housing starts increased 0.8 percent in February from the month before to reach a seasonally-adjusted rate of 917,000 per month, according to USA Today. 

This figure represents a sharp increase from the same one in 2012, as housing starts were happening at an annualized rate of 618,000 in February 2012, the media outlet reports. 

Additional data painted a picture of an improving housing market, as new permits for construction increased to their highest level since 2008, according to Reuters. The PHLX housing sector index surged to 194.41 during the day, which was its highest level since July 2007, before finishing the trading session 0.4 percent higher at 191.86. 

Manley noted the boost that such data gives to the markets, telling Bloomberg that "the housing market does seem to be on a bit more steady ground and that helps U.S. consumers." 

Continued bull market
The media outlet report notes that the bull market has generated robust gains since it began in 2009, with the S&P 500 Index surging more than 100 percent since March of that year. This group of stocks spiked 13.4 percent in 2012, and is currently very close to its all-time high of just above 1,565. 

While Anderson has predicted that the equity markets will experience a correction soon, many different Wall Street experts have recently provided upward revisions of where their forecasts for where the blue-chip S&P 500 Index will be at the end of this year. 

One striking example of the rising optimism of the top strategists working at major financial services firms is Adam Parker of Morgan Stanley, who drew visibility by providing a forecast for the 2012 movements in the S&P 500 that was significantly bearish, according to Business Insider. The market expert most recently projected that the S&P will rise to 1,600. 

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