NEW YORK (Reuters) - U.S. stocks fell on Monday after a plan to tax bank accounts in Cyprus to help pay for the country's bailout stoked worries that it could threaten the stability of financial institutions in the euro zone.
The move pushed the S&P 500 farther from its record closing high of 1,565.15 after the index came within striking distance of the level last week.
Financial stocks led the day's decline, with the S&P 500 financial index down 1 percent, following a steep slide in European bank shares. JPMorgan Chase (JPM.N) fell 1 percent to $49.51.
Cypriot ministers were trying to revise a plan to seize money from bank deposits before a parliamentary vote on Tuesday that will secure the island's financial rescue or could lead to its default.
European officials have said the measure is a one-off for a country that accounts for just 0.2 percent of European output. The fear is that savers in larger European countries will become nervous and start withdrawing funds, although there was no immediate sign of that on Monday.
"There are worries about whether there will be any spillover from the Cyprus situation," said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $45 billion.
"Will authorities be able to convince markets that this proposal is only for this unique situation, for such a small country where the banking system is more of a tax shelter? If they can't, that might cause new concerns about Europe's banking system."
The Dow Jones industrial average slipped 62.05 points, or 0.43 percent, to 14,452.06 at the close. The Standard & Poor's 500 Index shed 8.60 points, or 0.55 percent, to 1,552.10. The Nasdaq Composite Index dropped 11.48 points, or 0.35 percent, to close at 3,237.59.
Earlier in the day, the Dow had lost more than 100 points to tumble to an intraday low of 14,404.21.
The S&P 500 is up 8.8 percent for the year and is on track to post its best quarter in a year.
The Dow, which broke through its record highs on March 5, is still up about 10.3 percent for the year.
The CBOE Volatility Index, or VIX, Wall Street's favorite barometer of fear, shot up 18.2 percent to 13.36.
Among decliners, Schlumberger shares (SLB.N) fell 3.9 percent to $76.34 after the world's largest oilfield services company said fewer rigs than predicted were going back to work in its North American operations.
Shares of Dow component Boeing Co (BA.N) fell 1.4 percent to $85.18. Boeing is putting the 787 Dreamliner through tough tests that it had helped develop, but never used on the jet.
Shares of Charter Communications Inc (CHTR.O) surged 8.8 percent to $98.04 after the Wall Street Journal said Liberty Media Corp (LMCA.O) is close to buying a 25 percent stake in the cable operator for about $2.5 billion.
Liberty shares rose 0.3 percent to $110.66.
(Additional reporting by Ryan Vlastelica and Rodrigo Campos; Editing by Kenneth Barry and Jan Paschal)
Updated Date: Mar 19, 2013 03:30 AM