U.S. stocks declined, after the Standard & Poor’s 500 Index yesterday approached a record high, amid concern over Europe’s debt crisis and as pending American home sales slipped in February.
The S&P 500 dropped 0.1% to 1,562.90 at 4 p.m. in New York, paring an earlier decline of as much as 0.8%. The index rallied 0.8% yesterday as orders for durable goods and home prices exceeded estimates.
“When you have typically light days, the market can get pushed around a little bit more on nothing,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. His firm oversees $1.5 billion. “The market’s still poised to go up.”
The S&P 500 rallied yesterday to within two points of its record of 1,565.15 reached in October 2007. The benchmark gauge has surpassed the 1,560 level on six days since March 14, only to fall short of the record each time. The Dow climbed to another record yesterday, after first surpassing its 2007 all- time high on March 5.
The bull market in equities entered its fifth year this month as the S&P 500 more than doubled from its bottom in 2009, driven by an unprecedented three rounds of bond purchases by the Federal Reserve. The S&P 500 is up 9.6% for the year.
The Institute of International Finance said today banks in Portugal, Spain and Italy may come under funding pressure after a deal earlier this week in Cyprus rescued the island’s financial system at the expense of bank creditors.
European governments and the International Monetary Fund agreed Monday to lend Cyprus 10 billion euros ($13 billion) as long as the country liquidated its second-largest bank and forced losses on bank bondholders and deposits of more than 100,000 euros.
“I don’t think the bottom’s going to drop out, but it’s not that simple to just say, ‘Cyprus, where is it, who cares?’” Robert Doll, chief equity strategist at Nuveen Asset Management LLC, said in an interview on Bloomberg TV’s “Surveillance” with Tom Keene and Scarlet Fu. He helps oversee $117 billion at the Chicago-based firm. “It took years for Europe to get into this mess. It will take years for Europe to get out.”
While the improving economy is driving the bull market in U.S. equities, Doll said gains may slow after the S&P 500 surged 130% since March 2009.
“We’re due for a rest and a rest doesn’t mean a big decline,” he said.
Fewer Americans signed contracts to purchase previously owned homes in February, indicating a pause in momentum for an industry that is helping power the economy. The index of pending home sales fell 0.4% to 104.8, the second-highest level since April 2010, after a revised 3.8% increase the prior month, the National Association of Realtors reported.