Market Wrap for Monday, March 25: Stocks Fall Despite Cyprus Deal
The U.S. stock market opened higher on Monday morning, after EU policymakers reached a bailout deal for Cyprus, which has been beset by a banking crisis.
The optimism didn't last, however, as investors took the news as an opportunity to take profits. Under the terms of the deal, bondholders and depositors were forced to take losses and Dutch Finance Minister Jeroen Dijsselbloem said that the Cypriot bailout could become a template for other EU rescues in the future.
"The critical issue remains that of precedent for larger Eurozone countries, and the way in which the Cyprus situation has been managed does not seem to inspire a great deal of confidence," said Ilya Spivak, a currency strategist at DailyFX in New York.
The Dow Jones Industrial Average fell 64 points, or 0.44 percent, to 14,448.
The S&P 500 lost around 5 points, or 0.33 percent, to 1,552.
The Nasdaq Composite shed almost 10 points, or 0.30 percent, to 3,235.
Ben Bernanke Defends Fed Monetary Policy
Fed Chairman Ben Bernanke defended the central bank's aggressive monetary easing policies in prepared remarks to a group of academics in London and dismissed rhetoric about currency wars. "Because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not ‘beggar-thy-neighbor' but rather are positive-sum, ‘enrich-thy-neighbor' actions," he said.
The Fed chief has been grilled by Congress repeatedly about the potential consequences of the central bank's zero interest rate policy and massive asset purchases, all designed to lift unemployment and spur growth in the economy. Other central banks around the world have engaged in similar programs, and some observers are worried about competitive currency devaluations around the globe.
Crude oil rose on Monday to start the week. Near the close of equity trading, NYMEX crude futures were up 0.89 percent to $94.54. Brent crude futures advanced 0.24 percent to $107.92.
Precious metals were mixed on the day with gold falling slightly while silver rose. At last check, COMEX gold futures were down around 0.15 percent to $1,605.60. Silver had risen 0.41 percent to $28.82. Copper fell 0.61 percent on the session.
In the agricultural complex, corn rose around 1 percent while wheat was last trading down 0.34 percent. Movers in soft commodities included sugar and cocoa, both of which lost more than 1 percent on the day.
Near the close of equity trading, the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) was down around 0.02 percent to $117.30. Yields were slightly lower on the day across the board.
The 2-Year Note and 5-Year Note yields lost one basis point to 0.25 percent and 0.78 percent, respectively. The 10-Year Note and 30-Year bond yields also fell one basis point to 1.91 percent and 3.14 percent.
The U.S. dollar was strongly higher on Monday as investors showed some risk aversion. Near the close of equity trading, the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), which tracks the performance of the greenback versus a basket of foreign currencies, had risen 0.62 percent to $22.57.
The closely watched EUR/USD fell sharply after a bailout deal with Cyprus was reached on Sunday. At last check, the EUR/USD was down 0.92 percent to $1.2863. The only other significant mover was the USD/JPY, which fell 0.44 percent.
Volume and Volatility
Despite the moderate loss in the stock market, the VIX only finished up 2 percent to 13.84, suggesting investor concern continues to remain low.
Volume was slightly below average even as market players reacted to the bailout in Cyprus. Around 123 million SPDR S&P 500 ETF (NYSE: SPY) shares traded hands versus a 3-month daily average of 127.5 million.
Shares of private education provider Apollo Group (NASDAQ: APOL) were up around 7 percent heading into the closing bell after the company's fiscal second-quarter earnings results.
Vanguard Health Systems (NYSE: VHS) lost more than 6 percent on Monday after the company was notified by the state of Arizona that it was not going to be awarded a Medicaid-care contract this year.
Veeco Instruments (NASDAQ: VECO) jumped better than 8 percent on Monday as investors prepared for the company's quarterly earnings results after the closing bell.
Horizon Pharma (NASDAQ: HZNP) climbed better than 14 percent on the day. The reason for the advance in the small-cap stock was not readily apparent.
Enphase Energy (NASDAQ: ENPH) surged better than 8 percent on the day on no significant news. The stock has been rallying sharply in recent months.
Blackberry (NASDAQ: BBRY) shares fell almost 5 percent on the trading session ahead of the company's quarterly earnings report on March 28.
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