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US: effect from the Cyprus deal fizzles out

Zareena Sayeedova, Leading Analyst, Global Markets (Finam)

On Monday, March 25, US stocks saw mild losses, although after the opening the S&P 500 Index came within just one point of its all-time high. Initially, risk appetite on global exchanges was spurred by news Cyprus and international lenders had managed to strike a preliminary bailout deal. In particular, as part of the plan agreed the country’s two largest banks would go through deep restructuring and holders of EUR 100,000+ deposits are under threat of big losses. Thanks to intrusion into private property Cyprus will gather the amount required to unlock EUR 10 bn from the EU to avert default. The effect from the Cyprus news dissipated very quickly and only Asian equities had time to take advantage of these developments, while European plays broadly retreated.

No major macroeconomic data were released in the US yesterday, and trading was primarily determined by the external news flow. The only corporate highlight was the fact that competing bids were entered by Carl Icahn and Blackstone Group to buy computer maker Dell.

As for the benchmarks, the Dow Jones Industrial Average shed 0.44% to end at 14,447.75, the Standard & Poor's 500 Index slipped 0.33% to settle at 1,551.69 and the technology-heavy Nasdaq Composite gave up 0.30% to close the session at 3,235.30.

In commodities, NYMEX light, sweet crude for May delivery grew 1.2% to USD 94.81/bbl, while COMEX gold for April delivery fell 0.1% to USD 1,604.50/oz. In FX trading, the dollar firmed against the euro and the pound, but weakened versus the yen.

In the blue-chip segment, a few plays closed higher, including Verizon, HP, Cisco Systems and Coca-Cola that added around 1%. Among the decliners, the likes of 3M, McDonald’s and Bank of America pulled back over 1%.

As for S&P 500 components, industrials sustained heavy losses, with Textron and Caterpillar giving up over 1%.

In other news, education services provider Apollo Group, the owner of the University of Phoenix, surged 8.1% on news the company made some strategic changes in a bid to boost enrollment.

Pharmaceutical company Array Biopharma spiked 8.2% after Piper Jaffray upgraded the stock from neutral to outperform.

Computer maker Dell gained 2.6% on news renowned investor Carl Icahn and Blackstone Group placed bids to take over the company.

Biotech concern United Therapeutics shed 2.2% on news regulatory authorities again rejected its experimental drug to treat hypertension.

Smartphone producer BlackBerry pulled back 4.6% after Goldman Sachs cut its recommendation on the stock from Buy to Neutral following the disappointing debut of its Z10 model.