Dow Jittery Ahead of Cypriot Banks Reopening
After opening the day down 100 points on concerns about Cyprus, the Dow Jones Industrial Average battled back to finish down just 33 points, or 0.2%. The S&P 500 and Nasdaq closed with even narrower margins.
Cypriot banks will open tomorrow for the first day since early last week, when they were closed as bailout negotiations began and depositors' savings were put on the table. Investors fear a run on the banks could create a renewed sense of panic and hamper the bailout, which has promised to tax uninsured deposits. Eurozone finance ministers have also said that the Cyprus bailout could serve as a template for future financial rescues. Even as the banks reopen, withdrawals will be limited to 300 euros a day, checks will be forbidden, and there will be additional limits on credit card spending and taking money out of the country.
Only one relevant economic report came out today. February pending home sales surprisingly fell 0.4%, down from a 4.5% increase in January and below the 2% gain economists had expected. Still, the decline seemed to be a result of low housing inventories, which should lead to new construction, an overall positive for the housing market.
On the Dow today, JPMorgan Chase led the blue chips' decline, falling 1.8% as the big bank again came under federal scrutiny. After hours yesterday, prosecutors revealed they were looking into whether JPMorgan had failed to properly alert authorities about Bernie Madoff's activities while he was carrying out his Ponzi scheme. JPMorgan's failure to act could be in violation of a federal law requiring banks to report suspicious activities. After hours today, a judge ruled that the No. 1 bank by assets must face a lawsuit by a pension fund accusing it of mismanagement by investing the pension fund's money in Lehman Brothers in the run-up to the financial crisis.
On the other end of the big board, UnitedHealth jumped 1.7% after congressional staffers said Medicare could raise payments to insurers, a potential reversal from the market's belief that payments would be lowered. Investors had expected a 2.2% payment cut in Medicare Advantage, but that would be negated if Congress blocks a 25% drop in doctors' pay for next year.
Outside the Dow, J.C. Penney waved a white flag of sorts, ditching CEO Ron Johnson's Everyday Low Prices model for its former discount-intensive strategy. Penney's refusal to use markdowns had cost it many of its once-loyal customers as sales tumbled last year. Still, the Street shrugged at the move as shares finished down 0.7%.
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