Rough Day for Stocks

A sell-off in U.S. stocks accelerated Wednesday, with all three major indexes ending at their lowest levels of 2011.

The S&P 500 and Nasdaq composite erased their gains for the year, while the Dow is barely hanging on, up only 0.3% in 2011. Trading has been extremely choppy as investors try to sort out disappointing U.S. housing data against the backdrop of developments in Japan.

It didn't help that European Union energy commissioner Günther Oettinger sounded a warning bell about increased risks related to Japan's crippled nuclear reactors at a meeting in Brussels.

Moreover, the U.S. Embassy in Tokyo warned American citizens who live within 50 miles of the damaged Fukushima Daiichi nuclear plant to evacuate or take shelter indoors.

"Today's not a good news day, and the market is reacting emotionally," said Fred Dickson, chief market strategist at D.A. Davidson & Co.

The Dow Jones industrial average (INDU) tumbled 242 points, or 2%, with all 30 components of the blue chip index in the red. IBM (IBM, Fortune 500), General Electric (GE, Fortune 500) and American Express (AXP, Fortune 500) led the decline. The index was down almost 300 points at its low for the day.

The S&P 500 (SPX) slipped 25 points, or 2%, to end at 1,256.88. The broad index closed 2010 at 1,257.64.

The Nasdaq (COMP) lost 51 points, or 1.9%, to finish at 2,616.82. The tech-heavy index closed at 2,652.87 last year.

Dollar near all-time low against yen

Global concerns also pushed the dollar below ¥80 briefly, hitting ¥79.824, the lowest since April 1995 (More on currencies).

Wall Street's most widely cited measure of volatility, the VIX (VIX), surged almost 20% to 29.10. Earlier, it climbed above 30 for the first time since July.

Dickson is advising his clients to get to the sidelines until the picture of the nuclear threat in Japan becomes clearer.

Wednesday's declines came on the heels of a sharp sell-off in the previous session, which was dominated by worries about Japan. In a televised speech Wednesday, Japan's emperor told citizens not to give up hope as the country grapples with an epic earthquake.

"It's quite rare of the emperor to appear on television, and that has made investors a little nervous," said David Jones, chief market strategist with IG Markets in London.

Prior to the speech, Tokyo's Nikkei index rose 5.7%, rebounding from two days of losses that had drained more than 16% from the index.