* Soft demand at Italy debt auction sparks concern
* Cliffs Natural shares plunge after downgrade
* U.S. February pending home sales index fell 0.4 pct
* Dow off 0.3 pct; S&P 500 off 0.2 pct; Nasdaq off 0.2 pct
By Chuck Mikolajczak
NEW YORK, March 27 U.S. stocks dipped on
Wednesday as soft demand at an Italian debt auction kept
concerns about the financial stability of the euro zone at the
center of investor focus.
The stalemate over the formation of a new government in
Italy and the fiscal upheaval in Cyprus were reflected in a rise
in Italian bond yields, with the five-year debt costs at the
highest level since October.
But equities pared earlier losses after a Greek newspaper
reported Cyprus plans to ban cashing checks and limit the amount
of cash that can be taken out of the country under a series of
measures to avert a run on the country's crippled banks.
"Markets sold off early. Of course, it's focused like a
laser on Italy and Cyprus, and none of the headlines coming out
of that part of the world are really engendering a great deal of
confidence in a positive outcome," said Peter Kenny, managing
director at Knight Capital in Jersey City, New Jersey.
"Yes, we've rallied off the intraday lows, but with no
volume, and frankly we've done that without the banks opening in
Cyprus," Kenny added.
The PHLX Europe sector index declined 1.3 percent.
Cypriot banks are due to reopen on Thursday. The chief
executive of the Bank of Cyprus, the country's largest
commercial lender, said he had been dismissed by the Central
The Dow Jones industrial average dropped 40.67
points, or 0.28 percent, to 14,518.98. The Standard & Poor's 500
Index shed 3.68 points, or 0.24 percent, to 1,560.09. The
Nasdaq Composite Index lost 6.93 points, or 0.21
percent, to 3,245.55.
Still, the S&P 500 remains about 5 points away from its
all-time closing high of 1,565.15. The index has been unable to
break through that milestone in recent sessions, including
Tuesday's gains that left the benchmark within 2 points of the
historic level set on Oct. 9, 2007.
As more attempts to break the mark fall short, the
likelihood of a sharper pullback - that many analysts have been
anticipating - grows.
Boeing was the biggest drag on the Dow, off 0.9
percent at $85.84 as the company faces a temporary ban on some
of the long-distance, trans-ocean journeys for its 787
Dreamliner while it works to regain permission for the
resumption of flights.
Cliffs Natural Resources Inc shares lost 15.3
percent to $18.15 and ranked as the S&P 500's worst performer
after Morgan Stanley downgraded the miner's stock and Credit
Suisse slashed its price target, citing difficulties from a
surplus of iron ore pellets in the Great Lakes region.
Data showed contracts to buy previously owned U.S. homes
fell in February, held back by a shortage of properties, but
there was little to suggest that the housing market recovery was
stalling. The National Association of Realtors said its U.S.
Pending Home Sales Index slipped 0.4 percent in February.
Economists had expected a decline of 0.2 percent.