You can tell that investors and the financial media had grown accustomed to the run-up in stocks earlier this month, as any down day now triggers speculation of impending doom. Today, we have the ongoing situation in Cyprus and disappointing pending home sales here in the U.S. to thank for the worry. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES:^DJI) is down 32 points, or 0.22%.
In order to meet its obligations under an ECB- and IMF-funded bailout, the tiny island nation of Cyprus has agreed to close its second-largest lender and confiscate a purported 40% of all deposits in excess of 100,000 euros. The country has also imposed capital controls meant to stem the outflow of money once its banks reopen for business on Thursday: They've been closed for the last week and a half, pursuant to a government-mandated bank holiday. Suffice it to say that the decision on deposits has rattled the markets over the last few weeks, as it has called into question the sanctity of funds once presumed safe.
Adding to pessimism today was data showing that pending home sales -- a measure based on contract signings -- slipped last month. The National Association of Realtors' pending-home-sales index fell 0.4% in February to 104.8. While this was lower than the previous month's reading of 105.2, it was nevertheless 8.2% higher on a year-over-year basis.
The problem, according to NAR chief economist Lawrence Yun, is that a limited inventory is holding back sales in many areas. "Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels," Yun said in a prepared statement. "Most local homebuilders are small businesses and simply don't have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market."
Despite the marginal step backward, it has become increasing clear that housing is truly improving. According to a New York-based fund-manager quoted by Bloomberg, "There's absolutely no question about that if you look at all the data, not just one month. Investment is starting to come back and one of those legs is housing."
In terms of individual stocks, shares of Boeing (NYSE:BA) are lower today after aviation experts and government officials predicted that the Federal Aviation Administration would limit the flying times of its beleaguered 787 Dreamliners. The planes were grounded two months ago after battery problems sparked fires on two separate aircraft.
According to an industry analyst quoted by Reuters, "Depending on how long that restriction remains in place, it would completely undermine the business case for the airplane, which was to be able to do these long, thin intercontinental routes."
And shares of JPMorgan Chase (NYSE:JPM), the nation's largest bank by assets, are also suffering following a revelation that prosecutors are looking into its role in the Bernie Madoff scandal. As my colleague Dan Carroll discussed earlier today, the issue concerns whether the bank violated laws by failing to alert authorities to Madoff's fraudulent scheme, which was revealed in 2008 once his sons purportedly learned of the deception.