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The S&P 500 rallied so close to its record closing high in the first hour of Monday' s trading, just 0.24 points shy of that level, boosted by a last-minute bailout deal for Cyprus.
But the index plunged hard and ended up in the negative territory, missing another chance to create a historical moment.
It seems that Eurogroup President Jeroen Dijsselbloem' s negative comments on the eurozone were to blame for the chaos of the market and spoiled the S&P' s long-waited historical moment. The S&P 500 shed as much as 18.69 points to an intraday low of 1546.22.
However, traders noted that, besides fears of the Cyprus bailout being used as a template for other peripheral eurozone countries, the exhausted market after recent rallies and the broader index representing more sectors also explained why it took longer for the S&P 500 to set a new record high.
The reason why the market goes from plus to minus is partly because of the comments of Dijsselbloem who said the new Cypriot bank restructure could be a model to be used across all of Europe, thus sending up nerves across the region, Kenneth Polcari, director of New York Stock Exchange Floor Operations at O'Neil Securities, told Xinhua.
Dijsselbloem, who also serves as the Dutch finance minister, said in an interview with the Financial Times and Reuters that if there is a risk in the bank and the bank cannot recapitalize itself,"then we' ll talk to the shareholders and the bondholders, we' ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders."
Under the new agreement, deposits below 100,000 euros will be protected from paying a levy while deposits above the amount will be subject to a high haircut expected to be over 30 percent.
Dijsselbloem' s comments stoked investors'angst as people of the struggling PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) worried that if their nations were drawn into a similar situation, the same could happen in their countries.
Some analysts said whether there is a bailout or not, Cyprus is going to face severe bank runs, especially capital flights of foreign depositors.
The CBOE Volatility Index, a barometer of investor sentiment and market volatility, jumped 7.7 percent to an intraday high of 14.61 from its previous close of 13.57, but it lowered a bit to end at 13.74 on Monday.
Although Dijsselbloem later in the day clarified that the bail-in measures for Cyprus is"a specific case with exceptional challenges"and"no models or templates are used," , damages have been made to the market and it failed to bounce back or convince investors.
Another reason for the pull-back is that the market is up roughly 9 percent year to date, so people shouldn' t be surprised to see the market taking a breath and correct itself a little bit.
Up to date, the S&P 500 is up 8.8 percent, the Dow Jones Industrial Average up 10.3 percent and the Nasdaq Composite up 7.1 percent.
"The record-high is a resistance (for the index). So the S&P 500 struggled with that over the last month and a half, running up and then back,"Polcari said.
Over the past two weeks, the S&P 500 closed within 5 points of its record closing high for five times but failed each time to surpass the line.
"The bull market run will probably be silenced here at the moment, but that doesn' t necessarily mean that we are collapsing either. It means the market might be just churning for a while until there' s much more clarity out of Europe,"Polcari noted.
Most traders believed that, in the near term, European headline risks will continue to cap the S&P 500' s bullish run and the Cyprus issue will continue to cause anxiety and angst among investors.
Last but not least, the S&P 500 is a broader index with more companies and industry groups compared to the Dow, which only has 30 components, thus it takes a little bit more time for the the broader index to catch up to this move, Keith Bliss, the senior vice president and director of sales and marketing at Cuttone & Company, told Xinhua.
A minor reason is that Thursday will be the last day for the Easter holiday-shortened week, as well as for the month and the first quarter, a time when portfolio managers usually wouldn' t make drastic decisions to materially affect their performance, compared to the beginning of a month when there' s a substantial influx of new capitals fluxed to pushed the market up.
Polcari said the investors will hold things in check until they get a sense of what company earnings and profit margins are look like and what CEOs will say about the future. He also predicted that the first quarter of 2013 could be weaker than people thought but companies sometimes surprise market estimates.
In view of the slowly improving U.S. macro economy, and a bunch of housing data due out this week that are likely to confirm the modest economic recovery, the S&P 500 will keep grinding up against its historical level.
"There will be a lot more trepidation when the S&P 500 gets its all-time high... when we' ve got less and less companies making new record highs every day,"Bliss said, adding that"the upside is going to be limited."
Regardless of the drop, Bliss also said the U.S. market is"incredibly resilient here,"saying news as big as the Cyprus crisis might send the S&P 500 down 3 percent two years ago.
