NEW YORK – Stocks fell sharply Tuesday and bond prices rose as the nuclear crisis in Japan grew following last week's deadly earthquake and tsunami. The Dow Jones industrial average fell more than 130 points.
The market dropped sharply at the start of trading on news that dangerous levels of radiation are leaking from a crippled nuclear plant. Investors are selling because of uncertainty about the impact the nuclear crisis might have not only on Japan, but also on companies in this country. Japan, the world's third-largest economy, accounts for 10 percent of U.S. exports.
Intel Corp., National Semiconductor Corp. and other chip makers were among the biggest losers. Many technology companies are dependent on Japanese factories for their products or components. Insurance companies that do business in Japan, like Aflac Inc., also fell sharply.
The Federal Reserve's statement that the economy is on firmer footing gave stocks some support. But it didn't ease investors' anxiety about Japan. The Dow, down about 170 points before the Fed's statement, recovered to a loss of 131 points.
Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners, said fear had taken hold in the market.
"It's a situation where you sell, and you ask questions later," he said.
After initially falling as much as 297 points, the Dow backtracked and was down 131 points, or 1.1 percent, at 11,862 in early afternoon trading.
The Standard & Poor's 500 index fell 15 points, or 1.1 percent, to 1,283. The Nasdaq composite index fell 33, or 1.2 percent, to 2,668.
Only 499 stocks rose on the New York Stock Exchange, while 2,503 fell.
Investors sought the relative safety of U.S. Treasurys, sending prices higher and yields lower. The yield on the 10-year Treasury note dropped to 3.32 percent from 3.36 percent late Monday. Treasury prices soared during stocks' long drop during the financial crisis. They have fallen as stocks recovered, but events like the Japanese quake and tsunami send investors in search of safer places to put their money.
Tuesday's trading showed what happens to stocks when investors don't have answers yet about a crisis. The extent of the damage from the quake and the tsunami isn't yet known. And so the impact on the country and its trading partners may not be known for some time.
Stocks have been fluctuating sharply since the quake. The Dow fell 228 points Thursday, and came back 59 Friday. The market has a long history of bouncing back after a big drop. But an extended period of volatility is likely until the situation in Japan becomes clear.
All 10 company groups in the S&P fell Tuesday. Technology stocks fared worst, falling 1.6 percent. Power outages have made it nearly impossible for Japanese factories to produce semiconductors and other electronics, said Kim Caughey Forrest, equity research analyst at Fort Pitt Capital Group.
Intel fell 3 percent, the most of any stock in the Dow average. National Semiconductor also fell 3 percent. Jabil Circuit Inc., which makes parts for electronics and other technology companies, fell less than 1 percent.
Energy stocks also fell as the price of oil dropped below $100 a barrel. Crude was down $2.04 at $99.15 a barrel as analysts anticipated lower demand because of the earthquake. Exxon Mobil Corp. fell about 1 percent.
Among insurers, Aflac was down 6 percent. The health and life insurance company does about 75 percent of its business in Japan, but said it was well prepared to handle claims in the country. Hartford Financial Services Group Inc., which also has operations in Japan, fell 4 percent.
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