Fears of a major U.S. stock sell-off were confirmed on Tuesday after Japan’s Nikkei index ended down nearly 11 percent. The risk of radioactive material leaking at the Fukushima Daiichi nuclear power plant leaves many investors fearful of a nuclear crisis after an 8.9-magnitude earthquake caused significant damage to the plant and resulted in explosions on Saturday.
Japan’s Nikkei Index Dropped as Low as 14 Percent
After Japanese Prime Minister Naoto Kan announced on Tuesday that the risk of radioactive material leaking from the Fukushima Daiichi plant was enough to “impact human health,” the Nikkei index responded with a significant sell-off.
While the index ended down by almost 11 percent, it dropped as low as 14 percent during the session. Over the past two days, the index has shed a whopping 17 percent, resulting in its worst two-day loss since 1987.
The Japanese government says it has taken steps to bolster the nation’s financial system, but investors are still nervous about the short-term outlook of the nation’s economy, which is currently the third-largest in the world.
Dow Jones Drops 216 Points at Open
While U.S. stocks remained steady last week after the onset of the quake, the radiation threat is creating a different reaction. Dow Jones industrial average futures predicted a 243-point drop during the day, but according to reports, the average dropped 216 points, or 1.8 percent, within the first two minutes of trading.
The S&P 500 also dropped considerably, falling 25 points (1.9 percent) at open, while the Nasdaq dropped 70 points (2.6 percent) at the same time.
One of the biggest U.S. stocks to suffer during pre-market trading was General Electric, which fell more than 4.6 percent largely because the Japanese nuclear plant that exploded and set off the radiation fears was equipped with GE-designed reactors.
Mark Luschini, chief investment strategist at Janney Montgomery Scott, told CNN Money that he expects investments to struggle as long as the risk of radiation in Japan is high. “The U.S. market is pricing in a worst-case scenario with the nuclear situation,” he said.
With fears of lives lost at the forefront, investors are placing their focus on the massive toll radiation threats pose for Japan’s economy in the near future.
