Cyprus Continues To Pressure US Markets And ETFs

Index ETFs and US markets felt more heat from Cyprus today, despite the Fed induced “easing” bonanza yesterday. The SPDR S&P 500 ETF (SPY) lost .85%, the SPDR Dow Jones Industrial Average ETF (DIA) lost .64%, the NASDAQ ETF (QQQ) lost 1.13%, and the iShares Russell 2000 Index ETF (IWM) lost .88%.

The spotlight is back on that tiny little island in the Mediterranean again, after the ECB gave Cyprus until Monday to come up with a viable bank relief package, or else lose current levels of emergency cash and a larger bailout in the future. Banks in Cyprus are still closed, and rumors circulating the island about a viable fix include a new bank levy on accounts over 100,000 Euros, a Russian cash infusion in return for a Russian Naval Base on the island, and the overwhelming fear of bank runs when banks finally do re-open. Suffice it to say, tensions are running high, and nobody quite knows how this particular chapter of the European debt crisis will pan out.

Regardless, US Index ETFs are definitely under pressure from the Cyprus crisis, despite yesterday’s gains in response to Dr. Ben refilling the punchbowl with more easing initiatives. Although US stocks and Index ETFs are declining slightly, most indexes appear to be hovering, waiting for the final outcome of Cyprus versus the EU. Keep in mind that it was the Cyprus crisis which derailed our ten-day-in-a-row Dow streak, but perhaps the Cyprus mess will be the proverbial “straw” that just might break the Index’ back this time. More details will emerge I am sure, but things are not looking good at this point.

From the home front, initial unemployment claims rose this past week, but the number was still 4000 fewer claims than the expected amount. Also, the Philly Fed’s Business Outlook Survey rose from -12.5 in February to +2 in March, so good news here.

Bottom Line: Cyprus is center stage again and will likely stay on center stage until at least Monday, if not later. So, it looks like reality set in today after yesterday’s Fed bonanza, and reality may be gruesome come Monday.

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