US stocks fell on Monday after a Cypriot plan to tax bank accounts as part of a larger scheme to avoid a bankruptcy triggered a selloff in European financial shares, and rekindled fears about an escalation in the euro-zone crisis. The weekend announcement out of Cyprus came after the S&P 500 ended its 10th positive week in the last 11, and investors on Wall Street took the chance to cash in some of the recent gains.
Including Monday's modest decline, the S&P 500 is on track to post its best quarter in a year. Cypriot ministers were trying to revise a plan to seize money from bank deposits before a parliamentary vote on Tuesday that will secure the island's financial rescue or could lead to its default.
European officials have said the measure is a one-off for a country that accounts for just 0.2 percent of European output. The fear is that savers in larger European countries become nervous and start withdrawing funds, although there was no immediate sign of that on Monday.
"The issue ultimately for investors is: 'Is this going to cause contagion?'," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. She said European officials "have got to make clear this is Cyprus specific and contain the risk." An index of bank shares across Europe fell 1.8 percent. Their US peers followed suit, with the KBW bank index down 0.8 percent and the S&P financial sector index off 0.7 percent.
J.P. Morgan Chase fell 1.1 percent to $49.46 and ranked as one of the Dow's biggest percentage decliners. The Dow Jones industrial average fell 14.04 points or 0.10 percent, to 14,500.07. The S&P 500 slipped 4.48 points or 0.29 percent, to 1,556.22. The Nasdaq Composite shed 4.06 points, or 0.12 percent, to 3,245.01. Earlier, the Dow fell more than 100 points to reach an intraday low of 14,404.21. The S&P 500 hit an intraday low of 1,545.13, while the Nasdaq slid as low as 3,211.10.
The Dow is still up about 11 percent for the year and the S&P 500 is up about 9 percent so far in 2013. "The market was slowing and getting a bit ahead of itself," Krosby said. "This is just part of that digestion and consolidation. You don't see any panic in the US market."
The CBOE Volatility Index, or VIX, Wall Street's "fear gauge" rose 12.1 percent but was still below 13, indicating a lack of a shift in sentiment toward the stock market. US Treasury debt prices rose, but yields were within last week's range. Schlumberger shares fell 2.7 percent to $77.29 after the world's largest oilfield services company said fewer rigs than predicted were going back to work in its North American operations.
Shares of Dow component Boeing Co fell 1 percent to $85.60 and dragged on the Dow. To get its 787 Dreamliner flying again, Boeing is testing the plane's battery system to a standard that the company itself helped develop - but that it never used on the jet. Boeing's European rival Airbus has signed an 18.4-billion-euro deal ($24 billion) with low-cost Indonesian carrier Lion Air for 234 single-aisle passenger planes, poaching one of Boeing's fastest-growing customers.