U.S. stocks sink in face of worries about Japan

By Rita Nazareth
Tuesday, March 15, 2011

U.S. equities fell, sending the Standard & Poor's 500-stock index lower for a third time in four days, as investors struggled to assess how much damage Japan's worst earthquake on record will do to the global economy.

General Electric slumped 2.2 percent as Japan worked to contain radiation at a damaged nuclear plant. Coach and Tiffany sank at least 5.2 percent on concern that sales in Japan will fall. Las Vegas Sands, a casino company with most of its business in Asia, lost 3.6 percent as Jefferies cut its rating on the stock. MEMC Electronic Materials surged 11 percent on bets that demand for alternative energy will grow.

The S&P 500 closed 0.6 percent lower at 1296.39, paring an earlier drop of as much as 1.4 percent as oil settled little changed at $101.19 a barrel. The Dow Jones industrial average sank 51.24 points, or 0.4 percent, to 11,993.16. The iShares MSCI Japan Index Fund, a U.S. exchange-traded fund, tumbled 7 percent, the most since 2008.

Losses continued Tuesday in early trading as the Nikkei 225 stock average fell 476.31 points, or 5 percent, to 9144.18.

"The market is pricing in a better understanding of the enormity and complexity of the natural disasters that struckJapan," said Mohamed El-Erian, chief executive at Newport Beach, Calif.-based Pacific Investment Management. "The immediate impact will be felt through lower global aggregate demand, disrupted supply chains and funds flows into Japan."

U.S. stocks fell last week, sending the S&P 500 down 1.3 percent, after American and Chinese reports dampened optimism about the global economy. The benchmark gauge of U.S. stocks is down 3.5 percent from its 32-month high in February, while still more than 90 percent above its bear-market low in 2009.

The sell-off in Japan spread to Europe and the Americas.

"The Japanese earthquake has the potential to prompt further weakness in stock prices," said David Sowerby, a Bloomfield Hills, Mich.-based money manager at Loomis Sayles, which oversees $150 billion. "While you'll see the Bank of Japan provide intense liquidity and economic activity increase due to rebuilding, there's a lot of uncertainty. Still, if we have a 3 percent to 5 percent correction in stocks, we'd likely look at what's attractively priced."

Pfizer rose 1.8 percent, to $19.81. The world's biggest drugmaker is reviewing the sale or spinoff of business units that could shrink the company's revenue by almost half, said Tim Anderson, an analyst with Sanford C. Bernstein. Pfizer would split off four non-pharmaceutical businesses as well as other units to reduce annual revenue to between $35 billion and $40 billion, from $67 billion, Anderson said in a research report Monday, citing a meeting with chief executive Ian Read.

U.S. industrial production probably rose in February for a third month in the past four, indicating manufacturing remains a stalwart of the expansion, economists said before a report this week.

Output at factories, mines and utilities climbed 0.6 percent after a 0.1 percent decrease in January, according to the median forecast in a Bloomberg survey ahead of Federal Reserve figures March 17.

Other data may show less home construction and contained inflation, excluding food and fuel.

- Bloomberg News

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