Dow Declines 2% as World Markets Slide on Japan Supply Chain Fears

Arthi Gupta
15 Mar, 2011
New York City

U.S. indexes extended losses on increasing concerns of a nuclear radiation leak reaching a wider Japan after the third explosion at a nuclear power plant. U.S. import prices rose in February and Nasdaq and ICE launch a bid for the NYSE Euronext.

[R]10:00 AM New York – U.S. indexes extended losses on increasing concerns of a nuclear radiation leak reaching wider Japan after third explosion at a nuclear power plant. U.S. import prices rose in February. Nasdaq launched bid for NYSE Euronext.[/R]

World markets slumped after the Japanese benchmark index plunged more than 14% before recovering to a loss of 10.6% at close to a nearly two-year low as a third explosion at the nuclear power plant sparked worries of more radiation leaks.

Japanese authorities are still battling the threat of a possible radiation from the quake-stricken Fukushima No.1 nuclear plant after an explosion at reactor two, the third since Friday''s 8.9-magnitude earthquake, occurred at around 6.14 a.m. local time on Tuesday.

Earlier Prime Minister Naoto Kan urged all Japanese living within a 30 kilometer radius of the plant to stay indoors. """"""""There is still a very high risk of more radiation coming out,"""""""" Kan said.

Chief Cabinet Secretary Yukio Edano said higher levels of radiation recorded near the plant could have an adverse impact on human health.

""""""""Now we are talking about levels that can impact human health. (The) further away you get from the power plant or reactor, the value should go down,"""""""" Edano added.

The radiation leak worries set off a panic across the nation after Tokyo authorities reported a surge in radiation, thought still below harmful level, and a sell off in Asian markets that dragged market s in Europe sharply lower.

Markets in Asia dropped more than 2% in Australia, Singapore and Taiwan and in Europe the German index plunged 5% at the opening.

German Chancellor Angela Merkel announced the shutdown of seven ageing nuclear reactors for three months for a safety review.

The Bank of Japan on Tuesday injected 20 trillion yen or $245 billion into the financial markets in different operations including same-day loans to ease market concerns, reports said.

Today, the central bank of Japan added 8 trillion yen of liquidity in financial system. The bank also said it will buy 2 trillion yen in Japanese government bonds from March 17 to March 18 through repurchases.

The bank will inject 5 trillion yen to the financial system from March 17 to April 18 and another 5 trillion yen from March 16 to March 23.

In addition, markets also focused on the rising tensions in the Middle East and in North Africa after the opposition party in Bahrain denounced the arrival of Saudi army.

U.S. Import Prices Rise

The U.S. Labor Department said import prices rose 1.4% in February following a 1.3% increase in January. Excluding a 4% jump in prices for fuel imports, import prices rose by a modest 0.3%.

Additionally, the Labor Department said that export prices increased 1.2% in February after rising 1.3% in January. Export prices rose 0.9% excluding a 4.4% surge in prices for agricultural exports.

The Federal Reserve Bank of New York said that its general business conditions index rose to 17.5 in March from 15.4 in February, with a positive reading indicating growth.

IEA Maintains Global Oil Demand for 2011

The International Energy Agency maintains its 2011 global oil demand growth forecast but noted that high oil prices entail significant downside risks to this year''s outlook.

The IEA, in its monthly Oil Market Report released today, held its 2011 global oil product demand growth at 1.4 million barrels per day.

OPEC crude supply fell by 95,000 bpd to 30.05 millions of barrels a day in February. About 200,000 bpd monthly shortage due to Libyan crisis was partly offset by higher production from Gulf nations, it said.

Nasdaq Launches Bid For NYSE Euronext

Nasdaq OMX Group, Inc. is reportedly combining with commodities trader IntercontinentalExchange, Inc. to launch a bid for larger rival New York Stock Exchange parent NYSE Euronext, Inc., according to the Wall Street Journal.

The reported move comes four weeks after NYSE agreed to merge with Germany''s Deutsche Boerse to create the world''s biggest stock and derivatives exchange operator.

Earnings Review

ATP Oil & Gas Corporation ((ATPG)), the company that develops and produces oil and natural gas in the Gulf of Mexico and the North Sea reported fourth quarter revenues surged 91% to $141.75 million from $74.33 million in the prior year. Net loss in the quarter widened 417% to $206.64 million or $4.06 per share compared to the loss of $39.97 million or 80 cents per share last year.

Dole Food Company, Inc. ((DOLE)), the fruits and vegetables producer said fourth quarter revenues grew 2% to $1.55 billion from $1.53 billion last year. Net loss in the quarter was $36 million compared to income of $15 million last year.

DSW Inc. ((DSW)), the specialty footwear retailer reported fourth quarter net sales rose 16.3% to $468.45 million from $402.65 million a year ago. Net income in the quarter climbed 38% to $18.47 million or 41 cents per share compared to net income of $13.40 million or 30 cents a year earlier.

Hewlett-Packard Company ((HPQ)), the multinational information technology corporation authorized a 50% increase in its regular quarterly dividend to $0.12 per share and that it plans to increase its dividend in double-digit percentage every year.

Williams-Sonoma, Inc. ((WSM)), the specialty retailer of home products reported fourth quarter net revenue increased 9.7% to $1.20 billion from $1.09 billion in the previous year. Net earnings in the quarter increased 28.3% to $113.40 million or $1.05 per share compared to net earnings of $88.42 million or 81 cents per share in the previous year.