General Electric Co., which is in talks to sell reactors to India, fell 2.5 percent. Alcoa Inc. and Anadarko Petroleum Corp. slumped at least 1.4 percent as commodity prices fell amid speculation demand will slow. Intel Corp. dropped 3.1 percent after Nomura Holdings Inc. cut its recommendation for the world's largest chipmaker. Aflac Inc., the insurer that gets most of its revenue in Japan, sank 8.1 percent.
The S&P 500 retreated 1.3 to 1,279.93 at 12:29 p.m. in New York, the lowest level using closing prices since Jan. 28. The Dow Jones Industrial Average decreased 160.41 points, or 1.3 percent, to 11,832.75. The Nikkei 225 Stock Average sank 11 percent today and is down 16 percent this week, the biggest two- day drop since the October 1987 stock market crash.
"We're getting black-swan events almost every week now," said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, who helps manage $252 billion. "The risks stemming from the Japanese nuclear disaster to the Middle East turmoil are unquantifiable. What happens if we have a meltdown? Forget about good U.S. economic fundamentals at this point. Volatility is on the rise."
The Chicago Board Options Exchange Volatility Index, or VIX, which measures the cost of using options as insurance against declines in the S&P 500, surged 11 percent to 23.49, the highest level since November. The gauge's 2011 closing low was 15.46 on Jan. 14, as the S&P 500 advanced to its highest level in two years.
The S&P 500 has fallen 2 percent over the past two days, paring this year's gain to 1.6 percent. The benchmark gauge for American equities had risen 92 percent from its bear-market low in March 2009 through yesterday amid government stimulus measures and as corporate earnings beat analysts' estimates for eight straight quarters.
S&P 500 future contracts expiring in June fell 2.5 percent before the open of the exchanges. Since the beginning of 2010, declines of more than 1 percent in future contracts were followed by an average drop of 1.1 percent in regular trading, according to data compiled by Birinyi Associates Inc.
Global stocks slumped as Japan's Prime Minister Naoto Kan, facing a nation reeling from its strongest earthquake on record, said the danger of further radiation leaks increased at the nuclear facility, located 135 miles north of Tokyo in Fukushima.
The March 11 temblor -- updated yesterday to a magnitude of 9 from 8.9 by the U.S. Geological Survey -- and subsequent tsunami have led to what Kan called the country's worst crisis since World War II. There have been more than 400 aftershocks. The death toll exceeded 2,000 people since the earthquake and tsunami hit the northeastern part of Japan, Deputy Cabinet Secretary for Public Relations Noriyuki Shikata said.
"It's too early to assess the implications of the tragedy in Japan," said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees $9.5 billion. "This situation raises questions about nuclear power. That has an important psychological effect."
GE sank 2.5 percent to $19.43. The Fukushima plant consists of six reactors based on GE designs, three of which were built by the company, according to its website.
Gauges of energy and raw-materials producers in the S&P 500 slumped at least 1.1 percent. The S&P's GSCI spot index of 24 commodities dropped 2.5 percent, declining a fourth day, the longest losing streak since Aug. 24. Crude oil fell 2 percent to $99.22 a barrel. Gold and copper also declined.
Alcoa retreated 1.4 percent to $15.89. Anadarko declined 2 percent to $75.66.
Intel retreated 3.1 percent to $20.19. The world's largest chipmaker was cut to "neutral" from "buy" at Nomura, which cited weak personal-computer demand.
Aflac led declines among the 22 companies in the S&P 500 Insurance Index. Aflac declined 8.1 percent to $49.56. Hartford Financial Services Group Inc. dropped 5.2 percent to $25.43.
Stock-index futures maintained losses before exchanges opened even as a report showed that manufacturing in the New York region accelerated in March at the fastest rate in nine months. The Federal Reserve Bank of New York's general economic index rose to 17.5 from 15.4. Economists projected an increase to 16.1, based on the median forecast in a Bloomberg News survey. Readings greater than zero signal expansion in the so- called Empire State Index.
Separately, the Labor Department said that prices of goods imported into the U.S. rose more than forecast in February, led by gains in crude oil and food. The 1.4 percent increase in the import-price index exceeded the 0.9 percent median forecast in a survey and followed a 1.3 percent rise in January. Prices excluding fuel rose 0.3 percent. Food costs over the past 12 months posted the biggest gain since records began in 1977.
The iShares MSCI Japan Index Fund, a U.S.-traded security that tracks stock prices in the Asian nation, fell 1.8 percent, paring a slump of as much as 8.1 percent.