Dow, S&P 500 Hit 6-Week Low

I think it is still better than I fear as only down -1.15%. :-)

Dow

11,855.42

-137.74

-1.15%

By: Abby Schultz

Stocks closed off the lows of the day, although still down 1 percent, as buyers stepped into the market in afternoon trading even as investors remained unnerved by the escalating nuclear crisis in Japan.

The Dow Jones Industrial Average fell 137.74 points, or 1.15 percent, to close at 11.855.42, coming back from a nearly 300 point drop shortly after the market opened, and after dropping 51 points on Monday. The blue-chip index has fallen 4.32 percent since its high for 2011 on Feb. 18; for the year, the index is up 2.4 percent.


The S&P 500 fell 14.52 points, or 1.12 percent, to close at 1,281.87, after dropping more than 2.7 percent shortly after the open. For the year, the broad market index is up 1.9 percent.


The Nasdaq fell 33.64 points, or 1.25 percent, to close at 2,667.33, after dropping more than 3 percent earlier. Intraday, the Nasdaq fell to below the level where it started the year. The tech-heavy index has fallen 5.88 percent from it 2011 closing high of 2,833.95, hit on Feb. 18. For the year, the index is up 0.6 percent.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared more than 15 percent, to 24, after skyrocketing more than 25 percent at the start of trading.


Stocks trimmed losses in the final hour of trading after initially gaining ground following news the U.S. Federal Reserve's policy making committee would continue its massive bond buying program through June, even as policymakers noted growing strength in the economy. The Fed also said it would leave interest rates unchanged.


"I think, as traders tend to do, they see things as an opportunity," said Doreen Mogavero of Mogavero & Lee. "I’m not surprised to see a rally in the afternoon," Mogavero said, but added, "I’m not sure how it holds. Even though we are doing better than this morning, we are still not doing well."

Trading on Wednesday will take cues from what happens in Japan overnight, she said.

The Fed's policy setting committee appeared to "cut and paste" statements from its Beige book report on regional economic conditions, and recent speeches by Fed Chairman Ben Bernanke, in crafting their statement today, said John Canally, economist at LPL Financial.

"This is just another gradual acknowledgement that things are getting better in the economy, and they are beginning to worry about inflation," Canally said.

The statement was also a good transition statement as the Fed moves from being worried about deflation, to keeping an eye on higher input costs and their potential effects on the economy. "I think the Fed is still the markets friend here for at least a couple months," he said.

The initial sharp sell-off in stock as trading began was largely triggered by computer selling programs taking cues from declines in overseas markets in the wake of unsettling news about nuclear developments in Japan, said Peter Costa, president of Empire Executions. But buyers stepped in later in day, even before the Fed statement, finding bargains among heavily beaten-up stocks, including chip names.

"You hate to be a buyer on bad news, but there are opportunities in a lot of sectors," Costa said.

The widespread selling began in Tokyo, as stocks there plunged more than 14 percent at one point after the quake-hit Fukushima nuclear power plant was hit by two explosions. A significant rise in radioactive levels added to the anxiety over last week’s disaster, with warnings that winds with radiation could reach Tokyo.

Japan’s economics minister tried to calm investors at a press conference Tuesday, saying there was no reason to close Tokyo markets. The president of the Tokyo Stock Exchange appeared to confirm the markets would remain open in a statement on the exchange's website, although the timing of the statement remained unclear.

"I believe that the Tokyo Stock Exchange in its role as an important social infrastructure should continue to provide opportunities for stock trading," Atsushi Saito, president and CEO of the exchange wrote in a statement. "I would appreciate it if all investors and trading participants would respond in a calm and orderly manner."
In addition to the crisis in Japan, investors were absorbing news out of the Middle East. Bahrain declared a state of emergency amid news that troops were sent into the country from Saudia Arabia to quell protests. A soldier from Saudia Arabia was reportedly killed by protesters.