U.S. markets shrug off Japan quake

By Jia Lynn Yang and Ariana Eunjung Cha
Washington Post Staff Writers
Saturday, March 12, 2011; A14

The U.S. stock market barely reacted to the largest earthquake to ever hit Japan, as the level of damage from the disaster remained unclear.

By close of trading, the Dow Jones industrial average rose half a percent, while the Standard & Poor's 500-stock index, a broader measure, jumped 0.7 percent.

Markets elsewhere in the world were rattled by the news. The initial earthquake erupted in the last 30 minutes of trading on the Tokyo Stock Exchange, triggering a selling panic that left the Nikkei down 1.7 percent. The European markets also dropped, with the Stoxx Europe 600 index closing down 1 percent.

The muted reaction in the United States came after a volatile week, as investors reacted to renewed concerns about Europe's debt crisis, news of more violence in the Middle East and signals that China's booming economy might be slowing. The Dow on Thursday fell nearly 2 percent, the largest one-day dip since August.

Investors are trying to make sense of uncertainty on a number of fronts around the world, while mixed news regarding the health of the U.S. economy emerged Friday.

Retail sales had their biggest increase in four months, rising 1 percent in February, according to figures released Friday by the Commerce Department. The data did not factor in the crisis in Libya, which began to escalate toward the end of the month.

A more recent measure of consumer habits, the mid-March consumer sentiment index from Reuters and the University of Michigan, dropped 9.3 points to the lowest level since October. Consumers grew more pessimistic because of rising oil prices and greater fluctuations in the stock market, according to the survey.

And, in a sign that companies are still nervous about hiring, job openings in the United States fell in January by 161,000 to their lowest level in four months, according to data released Friday by the Labor Department.

There were 2.8 million job openings in January, well below the 4.4 million that were open at the beginning of the recession in December 2007.

On Friday, U.S. investors appeared to view the quake in Japan as posing a limited threat to the global economy.

Shares of U.S. insurance companies did not drop much on the news of the earthquake because the Japanese insurance market is dominated by Japanese companies, analysts said.

"The Japanese are really good at handling these kinds of events and saving lives and minimizing damage. It limits the impact of this event," said Paul Newsome, an analyst at Sandler O'Neill who focuses on the insurance industry.

Other analysts said that the already anemic Japanese economy - recently overtaken by China's - likely will see a surge in government spending on emergency response costs and a fall in consumption that could hurt the country's gross domestic product.

Some credit-rating firms have lowered or warned of cuts in Japan's sovereign rating recently with its government debt estimated to reach 210 percent of GDP in 2012 - the world's highest.

Government spending for reconstruction efforts in the aftermath of the earthquake would only add to the country's fiscal troubles.

Currency trading also turned volatile Friday. The yen dropped against the dollar in Asia before bouncing back, and other Asian currencies fell after the quake.

Japan's leading companies reported some damage to their operations. Sony, one of the country's biggest exporters, halted operations at six factories; two people were killed by a ceiling that collapsed at a Honda factory; Toyota stopped work at three factories; Nissan had to extinguish two fires; and JX Nippon Oil and Energy had to shut down operations at three refineries.

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