US equity averages ended mixed with the Dow Industrials eking out a slight gain, and the S&P 500 Index extending its longest slump of the year as Cyprus’ rejection of a bailout levy eclipsed economic data that showed growth in new home construction.
Stocks retreated as lawmakers rejected an unprecedented levy on bank deposits, throwing into doubt a EUR 10 billion bailout deal for the island nation reached with the European Union just three days ago. The government proposed a revised bill Tuesday that would exempt savings under EUR 20,000, but the nation’s parliament still rejected it. The deal had sought to raise EUR 5.8 billion by drawing funds from private bank deposits in return for EUR 10 billion in bailout money.
Index ETFs pared losses later in the session after the European Central Bank reaffirmed its commitment to provide liquidity to Cypriot banks within the existing rules.
Ahead of the open, the Commerce Department reported builders broke ground at an annual rate of 917,000 last month, with housing starts up 0.8 percent from an upwardly revised 910,000 pace in January. Building permits, a proxy for future construction, rose 4.6 percent to 946,000, the highest since June 2008.
The Federal Open Market Committee began a two-day meeting today after agreeing in December to tie record-low interest rates to thresholds for unemployment and inflation so that investors know what conditions will trigger a rate hike by the central bank.
The Dow Jones Industrial Average (DJIA) picked up 4 points, after rising as much as 62 points and falling up to 69. Extending losses into a third session, its longest losing run this year, the S&P 500 Index (SPX) fell 4 points with energy sliding the most and consumer staples performing the best among its 10 business sectors.
Treasury prices rose for a third day on Tuesday, pushing yields on the 10-year note to their lowest level in two-weeks, as investors sought refuge in safe havens amid reports the ruling party in Cyprus would abstain from voting on a EU proposal for bank levy as a bailout condition.
Across the Atlantic, the European exchanges retreated for a third day after newly-elected Cypriot President Nicos Anastasiades said lawmakers will most likely reject a EUR 5.8 billion bank-deposit levy stipulated by the EU to secure a EUR 10 billion bailout package.
The Stoxx Europe 600 index dropped 0.4 percent to close at 295.55, extending Monday’s 0.2 percent loss.
Barring Ireland and Denmark, national benchmark indexes declined in all the 18 Western European markets.
In regards to trends, the changes were only minor as our Domestic Trend Tracking Index (TTI) slipped to +3.34% while the International TTI ended up at +8.92%.
The latest ETF Model portfolio report will be updated and posted tomorrow morning.
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