The Dow Jones Industrial Average continues to fall from last week’s record highs as investors digest the eurozone’s contentious plan for bailing out debt-plagued Cyprus. As of 2:20 p.m. EDT, the Dow has fallen 48 points, or 0.33%, with a majority of its members in the red. Let’s get caught up on today’s biggest stories.
All eyes on Europe
Cyprus revealed a new plan today after Cypriots cried foul on the earlier plan to tax all bank deposits smaller than 100,000 euros at a 6.75% rate and all above that threshold at a 9.9% rate. The new bill sent to the island nation’s parliament proposes not taxing accounts under 20,000 euros, but concerns have risen that the revised plan would not raise the 5.8 billion euros targeted by the IMF and eurozone. The country’s banks are closed until Thursday as the parliament continues to delay a vote on the bill.
The problem raised by Cyprus’s radical measure isn’t the effect on the Cypriot economy; the nation’s GDP is minuscule compared to the European Union’s. However, if the initiative to directly tax bank deposits spreads to bigger troubled economies such as Italy and Spain, real trouble could be on the horizon. Cyprus’ move has already sparked fears of a bank run in the country: Average citizens drained ATMs yesterday. Such an occurrence in larger, more influential Italy could be disastrous.
Numerous stocks have dragged on the Dow as investors remain cautious, and Caterpillar Inc. (NYSE:CAT) has taken the worst blow today. Shares of the industrial giant have fallen 1.7% today, continuing an ugly 2013 for the stock. The company has blamed lagging demand in China and Europe for its excess inventory, compensating by continuing layoffs at select plants as it tries to bring production under control. While the housing turnaround in the U.S. should help Caterpillar Inc. (NYSE:CAT)’s waning fortunes, the company’s in desperate need of economic strength in China, as the second-largest economy’s slowdown has hurt stocks across the industrial sector.
Shares of The Walt Disney Company (NYSE:DIS) and Alcoa Inc (NYSE:AA) have joined Caterpillar downward today, losing 1.4% and 1.2%, respectively. Alcoa, like Caterpillar, is struggling with demand pressures — particularly in China, as the nation’s plan to slow its growing housing bubble has strained materials firms.
Meanwhile, Disney has announced new age restrictions for its parks. Unaccompanied minors under the age of 14 will now be banned from Disney parks and resorts as the company looks to improve children’s safety. While the move could have a small impact on park revenue, it doesn’t justify today’s sell-off. On the other hand, The Walt Disney Company (NYSE:DIS)’s stock has surged more than 30% over the past year, and a small dip is little to worry about for shareholders who have been rewarded handsomely.