U.S. Stock Market - Cyprus Still In The News

Most of the global financial markets remained in limbo today as Cyprus attempted to deal with its deteriorating financial situation. At around 3:15 PM ET, news was finally released that the Cyprus parliament rejected a controversial bank deposit levy that was a precondition for a bailout of 10 billion euros from international lenders. Most major U.S. stock indices were slightly lower at that time, but then rallied temporarily. However, with no apparent credible alternatives to resolve the crisis in Cyprus, the rally stalled. “Flight-to-quality” options like gold and Treasury securities were still well bid at the close of NY dealings today, but the last chapter has yet to be written on the current Cyprus dilemma or European woes in general.

Here are today’s closing marks, with changes from Monday’s close:

                                                                                 Tuesday’s Closing Prices                   

Dow Jones Industrial Average                    14,455.82        + 3.76              +0.03%

S&P 500 Index                                              1,548.34        -  3.76              - 0.24%

NASDAQ Composite Index                           3,229.10        -  8.50              - 0.26%

Russell 2000 Index                                           942.85        -  4.35              - 0.46%

Gold                                                                1,611.70       + 7.10              +0.54%

        

Bottom Line: Despite my overall bearish view of the U.S. stock market, I thought that today would be a stronger day than it actually was. While the Dow Jones Industrial Average managed to post a winning day, most other major indexes were down for the third straight day. Is the Cyprus situation relevant (Cyprus is just 0.2% of Europe’s total economy)? Can the Eurozone “kick this can” down the road without setting a key precedent for potentially dealing with nightmares like Greece, Italy and Spain at some later date? For the moment, the answer is yes; the Eurozone and all its bankers will find a way to kick the Cyprus can down the road. Cyprus has had its 15 minutes in the limelight of global financial disasters. As mentioned in previous columns recently, I think this week’s FOMC meeting is the most important event on the calendar.  The Fed’s post-FOMC policy announcement is now scheduled for Wednesday, March 20^th at 2:00 PM ET, and this short statement could easily provide the fireworks for an immediate expansion in volatility and maybe even valuable clues to the next major move in stocks.