The Dow Takes Another Mediterranean Vacation


Well, if you thought that every country in Europe had already had its chance to spoil the markets at least one day, you were wrong. Today, tiny Cyprus stole the headlines following the IMF's decision to bail it out over the weekend, sending stocks down around the world, and the Dow Jones Industrial Average south 62 points, or 0.4%.

The key issue in the bailout and the one roiling markets was a plan to tax deposits held in the small Mediterranean nation, often seen as a safe haven for European investors, and especially popular with Russians, similar to the Cayman Islands for Americans. Those holding bank deposits in Cyprus could lose up to 10% of their savings, and the decision seems to threaten the security of depositors elsewhere on the continent, though European officials insist this is a one-off solution. Parliament will vote on the bailout tomorrow. For more on the issue, see my colleague Morgan Housel's take on the matter.

Despite today's general downswing, Hewlett-Packard gained 2.9% on the day after Morgan Stanley Managing Director Katy Huberty said she expects HP to beat 2013 free-cash-flow estimates and upgraded the stock to "overweight." Huberty noted that the tech giant delivered FCF of $2.1 billion in its latest quarter and expects the PC maker to finish the year with $6.7 billion, rather than the $5 billion it had guided for. HP shares have now doubled since hitting bottom four months ago, following the Autonomy debacle. Huberty also noted improvements in cost structure, the brand, and employee morale.

Verizon shares also moved up 1.5% after the telecom said it wishes to pay for TV channels, through its FIOS TV service, based on unique views rather than subscriber fees. Unique views would be defined as a viewer spending more than five minutes on a single channel. The plan will probably meet resistance but could shake up a business model that seems dated and inefficient. The communications company also seemed to benefit from a Citigroup report that it may buy out Vodafone's stake in Verizon Wireless, which came with an upgrade from "neutral" to "buy."

Outside the Dow, two stocks were making news after hours. Shares of Electronic Arts were up 3.1% after CEO John Riccitello resigned because of his inability to drive profits at the struggling video-game maker. Chairman Larry Probst will return to the helm, and Riccitello accepted accountability for the company's failure to meet its own guidance in his resignation letter.

Lululemon athletica shares were getting sent to the doghouse as well, falling more than 6% after the company lowered its first-quarter guidance because of a pants shortage. CEO Christine Day said expected comparable sales increase for the current quarter would be revised down from 11% to 5%-8% and reduced overall revenue guidance by about 4%. The company will provide more information in its fourth-quarter earnings call, scheduled for Thursday afternoon, and said the shortage was due to supplies that didn't meet its high standards.

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Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica and Vodafone Group and owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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