By Edward Krudy
NEW YORK (Reuters) - Stocks tumbled more than 2 percent on Tuesday and the Nasdaq turned negative for the year as Japan's looming nuclear crisis looked set to thrust financial markets into a period of turmoil.
U.S. shares seen as exposed to the disaster as well as economically sensitive stocks fell sharply.
Insurer American International Group Inc slid 3.3 percent at $36.23, while aluminum producer Alcoa Inc lost 3.2 percent at $15.60.
General Electric Co gave up 3.3 percent at $19.22 on concerns the nuclear crisis will cost the company tens of billions of dollars in lost sales as well as potential legal costs or even liability over its nuclear technology.
A Japanese nuclear power plant sent low levels of radiation floating toward Tokyo, prompting people to flee the capital. The full extent of the destruction from the 9.0-magnitude earthquake and tsunami was still unclear as rescuers combed through the region north of Tokyo, where at least 10,000 people were killed.
"It is very unclear what exactly the situation on the ground is in Japan and it is additional unclear what the ultimate effects of this will be," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
The Dow Jones industrial average fell 232.27 points, or 1.94 percent, at 11,760.89. The Standard & Poor's 500 Index lost 27.13 points, or 2.09 percent, at 1,269.26. The Nasdaq Composite Index dropped 60.15 points, or 2.23 percent, at 2,640.82.
The Nasdaq turned negative for the year, falling 0.7 percent below last year's close of 2,652.87. The S&P 500 fell within four points of turning negative for the year and is up 0.8 percent since the end of December.
The CBOE VIX volatility index jumped as much as 20 percent to 25.05, its highest level in over six months.
In light of what could be the worst nuclear crisis since the Chernobyl disaster in 1986, investors questioned the nuclear industry's prospects as shares in the sector slid. The Global X Uranium exchange traded fund fell 15.3 percent to $13.33.
Japanese stocks slid 10.6 percent, posting their worst two-day losing streak since 1987. European shares dropped 3.2 percent.
In order to avoid unsettling markets even further, the U.S. Federal Reserve was expected to leave its monetary policy statement unchanged later Tuesday, said Peter Cardillo, chief market economist at Avalon Partners.
"Before this tragedy there was an outside chance that the Fed was going to be a bit more hawkish due to increasing oil prices and due to the growing inflationary concerns," he said.
Investors scrambled to assess the fallout from the crisis. Texas Instruments Inc warned on Monday of lost revenue from two semiconductor plants in Japan following the country's biggest-ever earthquake. The shares dropped 3 percent to $33.53.
Japanese shares traded in New York also slumped. Toyota Motor fell 3.7 percent to $78.63, while Sony Corp dropped 4 percent to $29.82. The ISHR MSCI Japan exchange traded fund lost 5.6 percent to $9.49.
Oil and other commodity prices slumped as investors feared Japan's crisis would hit global growth. Brent crude dropped 4.2 percent to just under $109 per barrel, while U.S. crude slid 3.7 percent to just below $97.45. Copper fell to a three-month low.
(Editing by Jeffrey Benkoe)
