NEW YORK (AP) - Fears over the escalating nuclear crisis in Japan overtook financial markets around the globe Tuesday, pushing stocks and other investments lower. The Japanese stock market lost 10 percent of its value, and Wall Street dropped steeply before bouncing back.
The Japanese Nikkei average fell to its lowest level in nearly two years after the country's prime minister said four crippled reactors at a nuclear power plant on the country's devastated coast were leaking dangerous amounts of radiation.
In the U.S., the Dow Jones industrial average fell almost 300 points at the opening bell. The futures market, which can indicate how stocks will perform, looked so ugly before trading began that the New York Stock Exchange invoked a special rule to smooth volatility.
The Dow recovered somewhat later in the day but still closed down 138 points, or more than 1 percent.
Investors sold stocks primarily because of fear that the disaster in Japan would slow down the global economy. Japan is the world's third-largest economy, manufacturing goods from computer chips to automobiles, and buys 10 percent of U.S. exports.
The jarring day came less than a week after the two-year anniversary of the low point for the markets after the 2008 financial crisis. Stocks have almost doubled in value since March 9, 2009.
Over the last five trading days, however, the Standard & Poor's 500 index has nearly lost 3 percent because of higher oil prices, signs of weaknesses in China's economy, and the still unknown impact of the quake and tsunami in Japan.
In addition to Japan, investors on Wall Street fretted about the Middle East, where Saudi Arabian troops moved into Bahrain and Libya's oil exports ground to a halt because of the rebellion against leader Moammar Gadhafi. Government bonds and other assets considered safer investments rose in price.
Stocks pared earlier losses after the Federal Reserve said that the U.S. economy was on "firmer footing." Still, 29 out of the 30 stocks that make up the Dow industrial average closed lower for the day.
The Dow Jones industrial average closed down 137.74 points, or 1.1 percent, at 11,855.42. The S&P fell 14.52 points to 1,281.87. All 10 types of companies that make up the index finished lower. Utilities had the largest fall, losing 1.9 percent, because of concerns that the disaster in Japan will make countries rethink plans for nuclear energy. First Solar, a company that makes solar panels, gained 8.1 percent to lead the S&P index.