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NEW YORK (CNNMoney)
The Dow Jones industrial average fell 0.3%, while the S&P 500 and the Nasdaq both lost 0.5%.
The retreat comes after the Dow's record-setting rally came to a close late last week. After rising for the past 10 trading days, the Dow fell 0.2% Friday, ending its longest winning streak since 1996.
"This could be an excuse for some profit taking after this powerful rally we've been experiencing," said Martin Leclerc, chief investment officer at Barrack Yard Advisors in Bryn Mawr, Penn.
The European Union unveiled a €10 billion plan early Saturday to rescue Cyprus' outsized banking sector and avoid a default. Though the bailout is relatively small, the EU has required a one-time tax of 6.75% on bank deposits of less than €100,000, and 9.9% for those over that amount.
Cypriots rushed to ATMs as the country tried to win parliamentary support. While eurozone leaders stressed that Cyprus is a unique case, investors worry that depositors in other financially weak European nations might face similar bailout provisions in the future.
Early Monday, Cypriot leaders said a vote on the plan has been delayed until Tuesday.
"The news from Cyprus is not good," said Jens Nordvig, currency strategist at Nomura Securities. "Haircuts for depositors were not expected, and it implies several dimensions of increased uncertainty."
Related: Cyprus bailout threatens to backfire
Given the Cypriot economy's size (accounts for less than 0.5% of overall output in the eurozone) and the amount of money involved, it's unlikely financial contagion will spread to other euro area nations, according to analysts at Barclay's Capital.
"We consider the likelihood of a bank run in other periphery countries to be limited, including in Greece," the analysts wrote in a report. The problems in Cyprus stem mainly from losses the nation's banks suffered on Greek bonds.
Meanwhile, the decision to tax bank deposits may impact Russia since half of all the bank deposits in Cyprus are believed to be held by Russians.
The euro plunged 1.1% versus the U.S. dollar to $1.29. European stock markets were also under heavy pressure. London's FTSE (UKX) fell 0.6%, the DAX (DAX) in Germany and France's CAC 40 (CAC40) both fell 1.1%.
Asian markets also tumbled. Japan's Nikkei plunged 2.7%, the Hang Seng in Hong Kong declined 2.2% and the Shanghai Composite lost 1.3%.
Bank stocks slumped around the globe. National Bank of Greece (NBG), Banco Santander (SAN) and Barclays (BCS) were all sharply lower.
In the U.S., shares of Wells Fargo (WFC, Fortune 500), Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) also fell.
Related: Fear & Greed Index backs away from extreme greed
Chesapeake Energy (CHK, Fortune 500)shares bounced back from an earlier decline after the company was downgraded on valuation concerns. Chesapeake said late Friday that it would continue its attempt to buy back $1.3 billion of its bonds.
Shares of Carnival Corp. (CCL) slide 2%, after the cruise line issued a weak sales forecast for the year on Friday. The company has had a string of mechanical issues over the last several weeks.
Constellation Brands (STZ) shares rallied after the Justice Department agreed late last week to give Anheuser-Busch InBev (BUD) and Modelo Group more time to negotiate the terms of their merger.
First Published: March 18, 2013: 9:44 AM ET
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