Stocks fall on Japan crisis, weak economic reports

NEW YORK — Worsening fears about the nuclear crisis in Japan shook financial markets Wednesday.

Stocks opened lower then dropped sharply in midmorning trading after the European Union's energy chief was quoted as saying that Japan's nuclear crisis could get worse. Treasury prices jumped, sending yields to their lowest levels this year as investors piled into investments seen as being more stable.

The Dow Jones industrial average fell 265, or 2.3 percent, to 11,590.

The Standard & Poor's 500 index fell 29, or 2.3 percent, to 1,253. All 10 company groups in the S&P 500 fell. The index has dropped 3.5 percent this week and has now given up all its gains for the year.

The CBOE Market Volatility Index jumped 18 percent, a sign that investors expect more volatility in the stock market.

Japan temporarily suspended work at a stricken nuclear plant after a surge in radiation made it too dangerous for workers to remain there. That came a day after Japan's prime minister said four crippled reactors at a nuclear power plant were leaking dangerous amounts of radiation.

The Nasdaq composite index fell 57, or 2.2 percent, to 2,610.

The yield on the 10-year Treasury note fell as low as 3.15 percent, the lowest level this year. In midafternoon trading the yield was 3.17 percent.

The dollar dropped to its lowest point in almost 16 years against the Japanese yen, briefly falling under 80 yen. The dollar is now close to its lowest point of the post-World War II era: 79.75 yen reached in April 1995.

A stronger yen hurts Japan's exporters, potentially dealing another blow to the economy already racked by an earthquake, tsunami and evolving nuclear crisis.

Japan's economy, the third-largest in the world after the U.S. and China, accounts for about 10 percent of U.S. exports.

The Commerce Department reported that new home construction fell to the second-lowest level on record in February, reflecting weak demand. Homebuilders Lennar Corp. and D.R. Horton Inc. each fell more than 2 percent.

Wholesale prices rose last month by the most in nearly two years due to higher energy costs and the biggest increase in food prices in 36 years. Shares of companies affected by higher food costs fell. McDonald's Corp. and Starbucks Corp. both fell 2 percent.