Stocks Plunge on Japan Radiation Warning
This post was last updated at 4:20 p.m. ET.
US stock markets were broadly lower, as the worst nuclear accident since the Chernobyl reactor disaster a quarter century ago continues to spark waves of fear and panic among investors. After initially falling as much as 297 points, the Dow closed down 137 points, or 1.15 percent to 11,855. The S&P 500 dropped 14 points, or 1.1 percent to 1,281; and the NASDAQ fell 33 points, or 1.2 percent to 2,667.
The New York Stock Exchange invoked "Rule 48" in order to dampen volatility that was anticipated as a result of the Japanese market drop. Rule 48 allows the exchange to suspend price indications that help determine the floor price at the open during regular sessions and can foster smoother opening. According to the NYSE, Rule 48 "is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair floor-wide operations at the Exchange by impeding the fair and orderly opening of securities."
Japanese and European stocks plunged after Japanese Prime Minister Nakoto Kan warned of radiation leaking from the Fukushima Daiichi Nuclear Power Station. The Nikkei 225 dropped 10.55 percent to 8605, following yesterday's fall of 6.2 percent. It was the worst two-day loss for Japanese stocks since 1987 and the biggest one-day percentage loss since October 16, 2008, during the global financial crisis. Japanese stocks have regressed to levels not seen for two years. European stocks fell to 14-week lows.
April crude oil tumbled $4.01, or 4 percent to $97.18 per barrel on the New York Mercantile Exchange, as the speculators who jumped in after the Middle East unrest are now paying the price. This may be the only upside of the entire disaster. Gold futures settled down $32.10 per ounce to $1392.80 as investors fled "risk" assets and pour the proceeds into the safety of US government bonds.
What does this mean for US investors? I discussed the implications of the Japan earthquake and its aftermath with WCBS-TV this morning.
Beyond our investments, there are a few other areas of the economy that will be impacted by the crisis in Japan:
Automobiles: While many of the Japanese automakers manufacture cars in the local markets where they sell them, 14 percent of all cars sold in the US are still built in Japan. Look to the Korean manufacturers to fill the void, while Honda, Toyota, Nissan and Mitsubushi are off-line.
Consumer Electronics/Computer Chips: Sony, Panasonic and Toshiba have shuttered plants, which will not only limit supply of TVs and camcorders, but will also impact the production of the small data-storage units that fit into smart phones and tablet computers. Experts don't see imminent dangers to global tech supply chains.
Luxury Goods: Japan represents 11 percent of global luxury sales, the third-largest in the world. Japanese consumers have helped high-end brands like Hermes, Burberry, LVMH and Tiffany recover from the bear-market lows.