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Dow Grabs Gain as Cypriot Parliament Downs Bank Deposit Tax

NEW YORK (TheStreet) -- The S&P 500 fell for a third day after the Cypriot parliament defeated a measure to levy a tax on bank deposits in the small Mediterranean island nation-state, eclipsing encouraging U.S. housing market data for February.

"It wasn't unexpected, there were intimations even earlier in the day that [the vote] was probably not going to make it," said Josh Feinman, global chief economist at DB Advisors. "I think the Cypriot thing over the last two days has caused a little bit of consternation in the financial markets ... but it's been pretty small."

The S&P 500 retreated 0.24% to 1,548.34, to book a three-day losing streak, its longest in 2013. The Nasdaq fell 0.26% to 3,229.10.

The Dow Jones Industrial Average inched slightly higher by 3.76 points, or 0.03%, to 14,455.82. The blue-chip index fell off by as much as 69.97 points, before reclaiming those losses in the late afternoon.

Concern grew that a full-blown Eurozone financial crisis could be in the offing if legislators in the tiny and indebted country of Cyprus are unable to reach an agreement to rescue their banks. Eurozone officials on Saturday asked the government to implement a plan to tax all bank accounts with the goal of helping to raise €10 billion in rescue funds for the island-nation.

Euro zone officials were reportedly seeking alternatives to the measures, proposing to not tax bank deposits below €20,000 and to make up for the shortfall with a higher tax on deposits above €500,000.

Reflecting the challenges of reaching a deal, Cypriot Finance Minister Michalis Sarris offered to resign, an overture that Cypriot President Nicos Anastasiades then rejected.

The European proposal to tax bank accounts could run into opposition from the Russian government along with Cypriots unhappy about a tax proposed by Brussels to sustain the country's banks.

"This would be particularly unpopular with the Russian Government, which might then refuse to extend the maturity of an earlier loan granted to Cyprus," Jennifer McKeown, senior European economist at Capital Economics in London commented in a note.

The FTSE 100 in London fell 0.26% and the DAX in Germany slumped 0.79%.

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DOW 17,042.06 +62.93 0.37%
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