--European, Asia markets slide, led by weakness in bank shares
--Financial shares lead declines
Bank shares led U.S. stocks lower as investors weighed the odds Cyprus' bailout plan will lead to broader weakness in the euro-zone's financial system.
The Dow Jones Industrial Average fell 62.05 points, or 0.4%, to 14452.06. The blue-chip benchmark fell more than 100 points at the start of the session, then briefly climbed into positive territory before turning lower in the final hour of trading.
The Standard & Poor's 500-stock index dropped 8.60 points, or 0.6%, to 1552.10, and the Nasdaq Composite Index shed 11.48 points, or 0.4%, to 3237.59.
The euro tumbled versus the dollar, to $1.29 in late New York trading. The price of the 10-year U.S. Treasury note surged as investors sought haven assets, pushing the yield down to 1.958%.
Financial shares led declines across nine of the S&P 500's sectors, while the telecommunications group advanced. The SPDR Financial Select Sector exchange traded fund, which tracks shares in the industry, dropped 0.9%. Morgan Stanley retreated 2.5%, while J.P. Morgan Chase fell 1%.
Investors were rattled by plans in Cyprus to tax bank depositors--a first in the euro-zone debt saga--to help fund a bailout from the European Commission, the European Central Bank and the International Monetary Fund.
"The concern is, what if this isn't a one-off?" said Larry Peruzzi, director of international-stock trading at Cabrera Capital, a brokerage firm. "What if European policy makers start doing this to Spain, in Greece, to all the other members that are having debt issues?"
The small size of the Cypriot economy tempered U.S. investors' concerns, keeping a lid on losses, said Sean Lynch, global investment strategist at Wells Fargo Private Bank, which oversees $169 billion in assets.
"We haven't seen the long lines outside of ATMs in Spain and Italy," Mr. Lynch added. "That's a good sign the problem has been contained."
The selling comes on the heels of four straight weekly gains for the Dow. Bulls point to stimulus efforts by the Federal Reserve, record-high earnings at U.S. corporations and signs of improvement in the domestic economy. Still, the march higher has left some market participants wondering if a pullback is imminent.
"People were looking for a reason to take some money off the table and this has given it to them," Cabrera Capital's Mr. Peruzzi said.
On the U.S. economic front, a measure of home builders' confidence fell for the second straight month. The National Association of Home Builders' housing-market index fell more than economists expected, as a lack of available land for construction discouraged builders.
European stocks declined, with the Stoxx Europe 600 falling 0.2%. Spain's IBEX 35 slid 1.3% while Italy's FTSE MIB dropped 0.9%.
Asian markets were also hammered on the Cyprus news. Japan's Nikkei Stock Average tumbled 2.7% and China's Shanghai Composite slid 1.7%.
March Gold futures rose 0.8% to settle at $1,604.60, while April crude-oil futures added 0.3% to settle at $93.74 a barrel.
Hewlett-Packard added 2.9% after Morgan Stanley raised its rating on the shares to "overweight," saying cuts to capital spending should boost the tech company's free cash flow.
Palomar Medical Technologies, a maker of lasers for cosmetic uses, jumped 4.4% after agreeing to a $294 million buyout by larger peer Cynosure.
J.C. Penney climbed 6.2%, posting the biggest gain among S&P 500 components and trimming the shares' slide this year. An ISI analyst said the department-store operator could boost its market value by subletting space in its top locations to other retailers.
Contract driller Helmerich & Payne fell 5.5% after saying competitors are "aggressively pricing rigs" to try to re- take market share.
The Chicago Board Options Exchange's Volatility Index, which measures traders' expectations for big price swings using options on the S&P 500, jumped 18%.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com
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(END) Dow Jones Newswires 03-18-130715ET Copyright (c) 2013 Dow Jones & Company, Inc.
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