S&P 500 extends longest slump of year as euro weakens on Cyprus

Dollar Gains

The dollar strengthened versus 14 of its 16 major peers as the Federal Reserve starts a two-day meeting today. Ben S. Bernanke is tightening his control of Fed communications to ensure investors hear his pro-stimulus message over the cacophony of more hawkish views from regional bank presidents.

The chairman, starting tomorrow, will cut the time between the release of post-meeting statements by the Federal Open Market Committee and his news briefings, giving investors less opportunity to misperceive the Fed’s intent. In recent presentations, he has pledged to sustain easing, defending $85 billion in monthly bond purchases during congressional testimony last month and warning that “premature removal of accommodation” may weaken the expansion.

‘Bit Extended’

The S&P 500 rallied as much as 131% from its 2009 bear-market low through March 14, coming within two points of its 2007 record close of 1,565.15, as the Fed’s programs suppressed borrowing costs and helped stoke three straight years of profit growth. The equity index’s dividend yield, currently at 2.1%, has been above the rate on 10-year Treasuries for almost a year.

This bull market “is getting time-wise a bit extended,” Jim Welsh, who helps oversee $6 billion at Forward Management LLC in San Francisco, said in a phone interview. “Could there be a little bit more life in this thing? Of course, there can be. The central bank obviously has the foot pressed to the metal. People have a lot of faith that that’s going to prevent anything bad from happening. I don’t believe Fed is going to change anything any time soon. They’re going to keep rates low.”

The yen strengthened against 15 of 16 major peers before a change of leadership at the Bank of Japan tomorrow.

‘Isn’t Just’

The Stoxx Europe 600 Index lost 0.4% today and has retreated about 1% from last week’s 4 1/2-year high.

Parliament began debating the deposit tax about 6 p.m. in the Cypriot capital, Nicosia, after President Anastasiades told German Chancellor Angela Merkel in a phone call that he doesn’t have the support to pass the measure. Lawmakers “feel and think it isn’t just and that it’s against the interest of Cyprus,” he told Sweden’s TV4 channel in an interview today.

The Mediterranean island nation’s banks and stock exchange will remain closed at least through tomorrow as the new Cypriot president seeks backing for the 5.8 billion-euro ($7.5 billion) levy on bank deposits, a measure needed to win 10 billion euros in international aid. Finance chiefs from the 17-member euro area urged Cyprus late yesterday to spare small-scale savers, as they maintained the size of their demand on account holders.

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