Investors retreated from stocks, oil and other risky assets as a worsening nuclear situation in Japan and a lackluster start to the U.S.'s corporate earnings season cast doubt over the global economic recovery. The Dow Jones Industrial Average dropped 117.53 points, or 0.95%, to 12263.58, while the Standard & Poor's 500-stock index lost 10.30 points, or 0.78%, at 1314.16, and the Nasdaq Composite fell 26.72 points, or 0.96%, to 2744.79.
Energy stocks led the selling as crude oil tumbled to $106.25 a barrel and fell further in after hours trading after finishing the previous week at $112.79 a barrel, a two year high. Metals also fell amid the commodities sell-off, with copper, silver and gold all down 1% or more on the day. Market watchers pointed to a number of reports that dented confidence in the global economy, including a growth downgrade for the U.S. and Japan from the International Monetary Fund and an assessment of weaker oil demand from the International Energy Agency.
Goldman Sachs also called this week for a pullback in commodity prices. Exxon Mobil dropped 2.3%, while Chevron slid 3.3%. Alcoa shares slumped 6% to lead the Dow losers after the aluminum producer late Monday reported earnings that topped expectations but revenue that fell short of forecasts. The drop-off in commodity prices underscored a growing concern among investors that geopolitical uncertainties and a weak start to the first-quarter corporate earnings season could presage a weaker economic outlook. Consumer stocks were the sole bright spot in the markets, with Wal-Mart Stores rising 1.3% on hopes that lower costs at the gas pump would boost the big-box retailer's fortunes.
European stocks dropped sharply Tuesday after Japan raised the severity level of its nuclear crisis to the same as the 1986 Chernobyl disaster and the first-quarter U.S. earnings season got off to a weak start, with commodity-related stocks coming under the heaviest pressure.
The Stoxx Europe 600 index closed down 1.7% at 276.24, with a 5% fall for miner Kazakhmys PLC in London and a 2.5% drop for French oil major Total SA as oil and metal prices pulled back. The pullback in oil prices helped lift travel and airline stocks, however, with shares of Air France-KLM up 2% in Paris and Ryanair Holdings PLC up 2.4% in Dublin. Mining stocks ranked as the biggest decliners in the U.K., helping pull the FTSE 100 index down 1.5% to 5,964.47. Shares of oil giant BP PLC dropped 2.8% after the Financial Times reported that the management of TNK-BP is getting ready to sue BP for up to $10 billion over an alleged breach of their shareholder agreement.
In Paris, shares of car maker Renault SA dropped 3.2%. Patrick Pelata stepped down as chief operating officer late Monday after the group made false accusations of corporate espionage against three other executives. Renault's retreat and a 5% drop in telecom-equipment firm Alcatel-Lucent SA contributed to the French CAC 40 index losing 1.5% to 3,976.60.
In Germany, chip maker Infineon Technologies AG fell 4.7% and Volkswagen AG was down 1.8%. Germany's DAX 30 Index fell 1.4% to 7,102.91. Shares of Allied Irish Banks PLC dropped 12%.The bank reported a 2010 loss that widened to EUR10.23 billion and said it will cut about 2,000 jobs in 2011 and 2012. The Irish ISEQ Overall index slipped 0.9% to 2,904.9. Other peripheral markets were also lower, with Portugal's PSI 20 index falling 1.6% to 7,787.1.
Asian shares fell Tuesday on selling prompted by Japan declaring its nuclear crisis a match for the Chernobyl disaster in severity and after the International Monetary Fund said global economic growth should slow this year as new risks emerge.
Several materials-sector shares tumbled as prices of crude oil and some other resources pulled back after the IMF's reported its views in its annual World Economic Outlook and Goldman Sachs withdrew bullish recommendations on some commodities. The day's sell-off gathered pace after Japan raised the crisis level at the Fukushima Daiichi nuclear-plant accident to the worst possible level on an international scale the same level as the 1986 disaster at Chernobyl in Ukraine. More earthquake aftershocks during the day also rattled investors.
Japan's Nikkei Stock Average fell 1.7% to 9555.26, South Korea's Kospi slid 1.6% to 2089.40, Taiwan's Taiex gave up 1.7% to 8732.59, Hong Kong's Hang Seng Index shed 1.3% to 23976.37 and China's Shanghai Composite slipped 0.1% to 3021.37. Some analysts remained positive on Japanese stocks for their appeal beyond the immediate crisis. A stronger yen and lingering worries over disruption to production sent most exporters lower, with Toyota Motor losing 0.6% and Sony falling 2.9%.
Shares of Tokyo Electric Power, the operator of the stricken Fukushima nuclear power plant, erased early gains on the elevated nuclear risk level and finished down 10%. Several energy and commodity stocks sank after analysts at Goldman Sachs said that the runup in prices over the past several months meant the potential reward for being long on commodities such as crude oil, copper and platinum no longer justified the risk. Inpex tumbled 5.2% in Tokyo, while PetroChina fell 4.9% and Jiangxi Copper lost 3% in Hong Kong.
Aluminum-related companies were also pressured after aluminum giant Alcoa reported disappointing quarterly sales figures Monday. Aluminum Corp. of China-Chinalco-fell 1.8% and United Co. Rusal slipped 0.5% in Hong Kong.
Base metals closed sharply lower on the London Metal Exchange Tuesday, with copper tumbling more than 2.4% amid a broad pullback in world commodity markets. LME three-month copper ended the session at $9,622 a metric ton, down $233 on Monday's PM kerb close. Other base metals were also down, as were precious metals, crude futures and many agricultural commodities.
LME lead closed down a massive 4.4%, while zinc and nickel tumbled 3% and 3.6% respectively. Crude futures plummeted Tuesday on signals from a chorus of forecasters that elevated oil prices are hurting fuel demand and weighing on the global economy. Light, sweet crude for May delivery fell $3.67, or 3.3%, to settle at $106.25 a barrel on the New York Mercantile Exchange, nearly 6% lower than the two and a half year highs notched Friday. Brent crude on the ICE futures exchange declined $3.06 to $120.92 a barrel.
Oil prices fell after the Paris-based International Energy Agency said there is already evidence that high oil prices are denting demand. In its own report Tuesday, the Organization of Petroleum Exporting Countries cut its 2011 oil-demand forecast. Separately, Saudi Arabia cut 500,000 barrels a day of recently added production due to tepid demand. Gold prices were swept lower amid a market-wide move to cash-in recent gains. The most actively traded contract, for June delivery, settled at $1,453.60 a troy ounce, down $14.50, or 1%, on the Comex division of the New York Mercantile Exchange. The April-delivery contract was down 1%, or $14.50, at $1,452.90 a troy ounce.