Dow Jones: 11,867.87 (-125.29) S&P 500: 1,283.18 (-13.21) Nasdaq: 2,669.35 (-31.62)US STOCKS slumped 1 per cent in a broad sell-off in morning trading yesterday as fears that Japan's nuclear crisis could turn into a larger catastrophe drove investors to less risky assets.

Some investors, however, expected the drop to be temporary, with the US economy taking only a short-term hit – even though the nuclear power industry will face longer-term consequences.

In a second day of losses tied to Japan, the SP 500 fell to within four points of support at 1,257, which was its 2010 closing level. The US benchmark index fell more than 2 per cent at the start of trading and the Nasdaq Composite Index briefly turned negative for the year.

Equities modestly pared losses but remained sharply lower after the Federal Reserve maintained its ultra-loose monetary policy and said the economy was gaining traction.

Activity on the iShares MSCI Japan Index fund suggested some investors believe that the sell-off could be overdone, and they are either closing out recent long-put positions or opening new bullish strategies.

Shaw Group, an engineering and construction company that is part of a consortium that builds reactors, dropped 2.9 per cent to $33.87 on many times its 10-day average trading volume.

Shares of General Electric, which has combined nuclear ventures with Japan’s Hitachi Ltd, dropped 2 per cent to $19.53.

The Dow Jones industrial average was down 125.29 points, or 1.04 per cent, at 11,867.87. The Standard Poor’s 500 Index was down 13.21 points, or 1.02 per cent, at 1,283.18. The Nasdaq Composite Index was down 31.62 points, or 1.17 per cent, at 2,669.35.

More than five stocks fell for every one that rose on the New York Stock Exchange, while on the Nasdaq about 80 per cent of stocks were negative.

The S&P 500 is down about 4 per cent since the start of the month, having rallied from early September. It is still up 21 per cent since September.

The CBOE VIX volatility index remained up 13.4 per cent in a sign of investor anxiety.

Among US stocks affected by Japan, insurer American International Group slid 2.1 per cent at $36.72, while aluminium producer Alcoa lost 1.2 per cent at $15.92. – (Reuters)