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%.

The benchmark 10-year Treasury surged by 14/32, diluting the yield to 1.91%. The dollar was up 0.27%, according to the U.S. dollar index.

Gold front month contracts for April added $6.70 to settle at $1611.30 an ounce at the Comex division of the New York Mercantile Exchange. Light sweet crude oil contracts for April delivery dropped $1.58 to close at $92.16 a barrel.

The U.S. Census Bureau reported today that housing starts, or new home constructions, rose to a seasonally adjusted annual rate of 917,000 in February from an upwardly revised 910,000 in January. Economists were expecting an increase to 915,000.

The bureau said building permits, a proxy for future construction, increased to a 946,000 annual rate, compared to the predicted rise to a 925,000 rate. The prior month's figure was downwardly revised to a 904,000 pace.

The Federal Reserve began its two-day policy meeting Tuesday and is scheduled to announce its latest policy stance at 2 p.m. on Wednesday. Fed Chairman Ben Bernanke will hold a press conference at 2:30 p.m. after the announcement.

AmerisourceBergen Corp ( ABC) shares jumped 3.6% to $50.06 Tuesday after the drug wholesaler announced a 10-year pharmaceutical distribution agreement with Walgreen ( WAG), the U.S.'s largest drugstore chain, and Walgreen affiliate and European drug wholesaler Alliance Boots. The deal also gives the companies rights to acquire a minority stake in AmerisourceBergen of up to 23%.

AmerisourceBergen forecast its revenues will rise $25 billion in the first year of deal.

Shares of Dublin, Ohio-based Cardinal Health ( CAH) tumbled 8.2% to $42.35 as the company's pharmaceutical distribution contract with Walgreen expires at the end of August and its services are mainly replaced by AmerisourceBerge.

Walgreen gained 5.4% to $44.74. The company on Tuesday reported fiscal second-quarter earnings of 96 cents a share on revenue of $18.65 billion, compared with expectations of 93 cents a share on revenue of $18.74 billion.

Electronic Arts ( EA) finished off 8.3% to $17.15 after announcing that CEO John Riccitiello is resigning from the games software maker as it struggles to reverse declining sales.

Riccitiello, who joined Electronic Arts in 1991, is relinquishing his position and leaving the company's board on March 30.

EA, the maker of games such as the Madden franchise, Tiger Woods, and others, also announced that its revenue and earnings per share outlook for the current quarter will be lower than initially estimated.

Written by Andrea Tse and Joe Deaux in New York

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