U.S. Market

The Standard & Poor's 500 stock index posted its biggest intraday drop of the year Tuesday as escalating tensions in the Middle East and North Africa sent oil prices soaring. The S&P 500 fell 1.8% to 1319 Tuesday, its biggest intraday point drop since Aug. 11. It was the measure's biggest percentage drop since Oct. 19. Traders noted that the market's losses deepened after the S&P 500 fell through support at 1324.

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The Dow Jones Industrial Average sank 161 points, or 1.3%, to 12230. At its lows of the day, the Dow had its biggest intraday point drop since Nov. 16 and its biggest percentage drop since Jan. 28, when news of unrest in Egypt spooked investors. Wal-Mart Stores weighed on the Dow, sliding 3.9% after the retailer's fiscal fourth quarter profit rose 27%, capitalizing on strength in its international business, but its U.S. operations continued to struggle. Wal-Mart posted its seventh consecutive quarter of lower U.S. same store sales, and fourth-quarter revenue fell short of analysts' expectations. Bank of America fell 4% after saying its credit-card subsidiary was restating eight quarters of reports to regulators because it took a $20.3 billion writedown due to deteriorating credit and new regulations over the past two years. Energy components were among the measure's few positive stocks as oil prices surged. Chevron gained 2.1%, while Exxon Mobil rose 1%.

The Nasdaq Composite fell 2.3% to 2768. Global stock markets extended Monday's declines as violence increased in Libya, a major oil producing state. Libyan leader Moammar Gadhafi publicly defied protesters seeking to end his rule, vowing to remain in the country until the end, in a televised speech that showed his determination to cling onto power Tuesday, as reinforcements of loyal armed military units tightened their hold around the capital. Libyan traders said the country had shut all ports, which would reopen in two to three days. Investors said the U.S. stock market had been ready for a correction, as major stock indexes had risen for 16 of the past 20 sessions to reach 2 1/2-year highs Friday. The geopolitical tensions in the Middle East and North Africa gave nervous traders reason to retreat, said Liz Miller, president of Summit Place Financial Advisors.

European Markets

European stock markets ended lower Tuesday, extending the previous session's heavy losses as turmoil in Libya escalated and crude-oil prices continued to rise. The Stoxx Europe 600 index shed 0.6% to close at 285.38. The pullback also came on the heels of sharp losses for Asian markets, where a major earthquake in New Zealand and a move by Moody's Investors Service to lower the outlook on Japan's Aa2 rating to negative from stable also weighed. In Libya, clashes between security forces and protesters continued.

Libyan leader Moammar Gadhafi, in a televised speech, defied protesters seeking his removal and vowed to remain in Libya until the end. Oil prices continued to rally on fears that supplies will be disrupted but fell back from earlier highs. Libya exports around 1.2 million barrels of oil a day, Saudi Arabia, on the other hand, exports 6.5 million barrels a day.

Airlines ranked among the hardest-hit stocks because of the sharp spike in oil prices: Shares of Air France-KLM dropped 3% and easyJet PLC fell 2.9%. Among the main indexes, the U.K.'s FTSE 100 fell 0.3% to close at 5,996.76, the French CAC 40 dropped 1.2% to end at 4,050.27, and the German DAX 30 index fell 3.46 points, less than 0.1%, to settle at 7,318.35.

Meanwhile, the Italian market opened late afternoon after being closed for most of the day due to a technical issue on the price information systems, Borsa Italiana said. The FTSE MIB index fell 1.1% after its delayed opening, adding to Monday's 3.6% slump. Italian stocks are seen as particularly sensitive to the recent turmoil given Italy's close ties to Libya. Shares of Italian oil giant Eni SpA fell a further 0.9% and UniCredit shares lost 1.8%.

Asian Markets

Asian equities took a beating Tuesday as investors sold down stocks across the region on worries about raging political tensions in the Mideast and North Africa. Japanese stocks were hammered down as selling pressure mounted after Moody's Investors Service lowered the nation's ratings outlook, while New Zealand shares and currency skidded after an earthquake in the country's second largest city.

Japan's Nikkei Stock Average fell 1.8%, China's Shanghai Composite sank 2.6%, Hong Kong's Hang Seng index lost 2.1%, South Korea's Kospi dropped 1.8% and Taiwan's Taiex shed 1.9%. The political crisis in Libya appeared to be worsening in the face of mounting violence against pro-democracy protesters, amid reports Libyan security forces had fired on demonstrators from war planes and helicopters. Airlines around the region were spooked as oil prices climbed, with All Nippon Airways losing 2.6% in Tokyo, Cathay Pacific Airways stumbling 5.1% in Hong Kong, Air China falling 5.1% in Shanghai, and China Airlines down 4.7% in Taipei. Energy sector shares fared relatively better, with Japan Petroleum Exploration rising 0.3% and Cnooc up 1.3% in Hong Kong.

Japanese shares lost ground as major banks as well as a number of exporters declined after Moody's changed its outlook on Japan's Aa2 rating to negative from stable, citing "heightened concern that economic and fiscal policies may not prove strong enough to achieve the government's fiscal deficit reduction target and contain the inexorable rise in debt." Shares of Mitsubishi UFJ Financial Group lost 3.6% and Mizuho Financial Group gave up 4.1%.

Exporters also lost ground on worries about geopolitical risks, with Toyota Motor falling 2.6% and Sharp Corp. losing 3.2%. Shares in China reversed early gains amid broad losses in the region on geopolitical worries, and as investors began withdrawing funds from the stock market to prepare for the subscription of refining giant China Petroleum & Chemical Corp.'s convertible bonds Wednesday. Baoshan Iron & Steel fell 3.9% and Gemdale lost 5.6%, while Jiangxi Copper skidded 5.1% in Shanghai.

Base Metals

LME copper closed at a three week low on the London Metal Exchange Tuesday, as investors sat on the sidelines amid growing fear that rising oil prices due to escalating tensions in Libya could destabilize the global economic recovery. At the PM kerb close, LME three month copper traded at $9,580 a metric ton, down 2.3% on the day, after hitting an intraday low of $9,574/ton in earlier trade. Violent clashes between protesters and pro-government forces in Libya have sent oil prices soaring in recent days, as speculative buying over possible disruption to the country's oil production mounts. The fear that high oil prices will force inflation and interest rates higher has damped sentiment toward base metals. The North African nation, a member of the Organization of Petroleum Exporting Countries, holds the largest reserves in Africa and accounts for about 1.7% of world crude output. The unrest in Libya has caused about 50,000 barrels a day of oil output to be shut down, an official at the International Energy Agency said Monday. Light, sweet crude for March delivery settled $7.37 higher at $93.57 a barrel at expiry. Gold futures settled at a seven week high as a jump in violence and protests in petroleum exporter Libya spurred safe haven buying. Silver notched a fresh 31-year high, while metals more closely tied to industrial uses, such as copper and palladium, tracked the stock market lower and finished at multiweek lows. Gold for April delivery , the most active contract, added $12.50, or 0.9%, to $1,401.10 an ounce on the Comex division of the New York Mercantile Exchange. That was gold's highest close since Jan. 3 and the metal's seventh consecutive session of gains.

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