By Edward Krudy
NEW YORK (Reuters) - Wall Street was set to tumble more than 2 percent at the open on Tuesday, tracking global equities sharply lower as Japan's looming nuclear crisis looked set to thrust financial markets into a period of turmoil.
A Japanese nuclear power plant sent low levels of radiation floating toward Tokyo, prompting people to flee the capital and others to stock up on essential supplies.
U.S. shares seen as exposed to the disaster as well as economically sensitive stocks plunged. Insurer American International Group Inc was down 4.7 percent at $35.75 in premarket trade, while General Electric Co dropped 5 percent at $18.90 and aluminum producer Alcoa Inc lost 3.5 percent at $15.55.
In light of what could be the worst nuclear crisis since the Chernobyl disaster in 1986, investors questioned the nuclear industry's growth prospects as shares in the sector slid. The Global X Uranium exchange traded fund fell 15.3 percent to $13.33.
Japanese stocks slid 10.6 percent, posting their worst two-day losing streak since 1987. European shares dropped 3.5 percent, led by nuclear-related utilities, luxury groups and assurance companies.
Nick Kalivas, an analyst at MF Global in Chicago, said a prolonged crisis could cause consumers and businesses to cut spending, but saw it as unlikely at this stage. "If we get into a hunker-down attitude, the market could have a lot further to go," he said.
S&P 500 futures lost 34.6 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures plummeted 259 points, and Nasdaq 100 futures dropped 69 points.
In order to avoid unsettling markets even further, the U.S. Federal Reserve was now more likely to leave its monetary policy statement unchanged later Tuesday, said Peter Cardillo, chief market economist at Avalon Partners.
"Before this tragedy there was an outside chance that the Fed was going to be a bit more hawkish due to increasing oil prices and due to the growing inflationary concerns," he said.
Investors scrambled to assess the fallout from the crisis. Texas Instruments Inc warned on Monday of lost revenue from two semiconductor plants in Japan following the country's biggest-ever earthquake. The shares dropped 4.5 percent to $33.01.
Japanese shares traded in New York also slumped. Canon Inc fell 6.2 percent to $40.80, while Sony Corp dropped 7.5 percent to $28.75. The ISHR MSCI Japan exchange traded fund lost 8.2 percent to $9.23.
Exchanges enforced short-sale restrictions against many Japanese and nuclear industry-related exchange traded funds, such as the Market Vectors uranium and nuclear energy fund and the ProShares Ultra MSCI Japan fund.
Oil and other commodity prices fell as investors feared Japan's crisis would hit global growth. Brent crude dropped 4.1 percent to near $109 per barrel, while U.S. crude slid 3.4 percent to just below $98. London copper fell more than 1 percent.
Adding to market jitters about unrest in the Middle East and North Africa, Bahrain declared martial law on Tuesday, a day after Saudi forces arrived in the Sunni-ruled kingdom to help restore calm following weeks of protests by the island's Shi'ite Muslim majority.
(Editing by Jeffrey Benkoe)