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At midday: Cyprus anxiety kicks in, hits stocks Add to ...

U.S. stocks were down in midday trading on Tuesday, surrendering an early lead following uncertainty about the Cyprus bailout. Canadian stocks held onto slight gains.

The S&P 500 was down 7 points or 0.5 per cent, to 1545. The blue-chip Dow Jones industrial average was down 49 points or 0.3 per cent, to 14,403. Canada’s S&P/TSX composite index was up 15 points or 0.1 per cent, to 12,797.

In Cyprus, lawmakers were supposed to vote on a proposal to raise money from the country’s bank depositors as part of a €10-billion national bailout – but there are growing concerns that they could reject the proposal or postpone it.

With or without a bailout plan in place, there are concerns that Cyprus could lead to a run on banks in the euro zone and send the ongoing debt crisis into another phase.

Bond yields of some European countries rose in reaction. The yield on the Italian 10-year government bond rose to 4.7 per cent, up 7.5 basis points. Portugal’s 10-year bond rose above 6 per cent, up 14 basis points.

Meanwhile, investors moved back into the perceived safety of U.S. government bonds. The yield on the 10-year Treasury bond fell more than 5 basis points, to about 1.9 per cent.

The anxiety follows an upbeat reading on the recovering U.S. housing market. Housing starts in February rose 0.8 per cent and building permits rose 4.6 per cent, rising to a five-year high. PulteGroup Inc., a homebuilder, rose 0.7 per cent and Toll Brothers Inc. rose 1.3 per cent.

Video-game maker Electronic Arts Inc. slumped 8 per cent after it announced that its chief executive is stepping down.

Lululemon Athletica Inc. fell 5.2 per cent in Toronto after a product recall on a line of yoga pants resulted in a lowered sales forecast.

Amid the market uncertainty, the CBOE volatility index, or VIX surged 9.5 per cent. The gain in the so-called fear gauge follows a 18 per cent spike on Monday – though from very low levels.

Gold rose to $1,613 (U.S.) an ounce, up nearly $9.

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