US STOCKS-Wall St falls on uncertainty about Cypriot plan

Last Updated: Tue, Mar 19, 2013 16:50 hrs

* Cyprus crisis fuels worry about contagion in euro zone

* Housing starts rise, permits at 4-1/2 year high

* Walgreen rallies after Amerisource deal

* Indexes down: Dow 0.2 pct; S&P 0.4 pct; Nasdaq 0.5 pct

By Rodrigo Campos

NEW YORK, March 19 (Reuters) - U.S. stocks fell on Tuesday as a planned tax on bank accounts to help pay for Cyprus's bailout appeared doomed in parliament, fueling caution on Wall Street about the euro zone crisis.

A vote on the plan, which European officials proposed over the weekend, may not even take place on Tuesday as planned after a government spokesman said it was unlikely to pass.

The Cypriot government proposed to spare small savers from the tax.

Investors in U.S. equities took advantage of the unease in Europe to cash in some recent gains, which have the S&P 500 on track to post its best quarter in a year. On Monday, the index posted its largest drop in three weeks.

"The market is not acting as if there is a reason to panic, but (Cyprus) is another thing people need to look at. It's enough reason to be cautious," said Doreen Mogavero, chief executive of Mogavero, Lee & Co from the floor of the New York Stock Exchange.

The overhanging concern is that account holders in other parts of Europe make a run on their banks on concerns they will also be taxed to help their struggling economies. No sign of a bank run or any proposal to tax accounts outside Cyprus appeared.

European bank shares extended their decline on Monday, as the sector's index fell 2.2 percent.

On Wall Street, energy-related stocks led declines with the PHLX oil services sector index down 2 percent. Schlumberger Ltd fell 2.5 percent to $74.46 and Halliburton dropped 3.1 percent to $39.46.

The Dow Jones industrial average fell 25.2 points or 0.17 percent, to 14,426.86, the S&P 500 lost 6.89 points or 0.44 percent, to 1,545.21 and the Nasdaq Composite dropped 14.67 points or 0.45 percent, to 3,222.92.

Consumer stocks capped losses on the S&P 500 after Walgreen Co and partner Alliance Boots said they signed a 10-year deal with AmerisourceBergen and will take a stake in the distribution company, ending Walgreen's current contract with Cardinal Health Inc.

Walgreen shares touched their highest since September 2007 and were last up 5.8 percent at $44.88. Amerisource gained 7 percent to $51.68 and Cardinal dropped 7 percent to $42.89.

Data showed that groundbreaking to build new U.S. homes climbed in February and new permits for construction rose to their highest since 2008, in a sign the U.S. housing market recovery was gathering steam.

The PHLX housing sector index rose 1 percent.

Drugmaker Affymax Inc said it was considering selling itself or filing for bankruptcy as it struggles to stay afloat following the recent recall of its sole commercial product. The stock plunged 59.6 percent to $1.18.

More from Sify: