WASHINGTON—US stocks plummeted Tuesday as warnings by Libya’s embattled leader Moamer Kadhafi threatened to plunge one of the world’s key oil states further into chaos.
The Dow Jones Industrial Average closed down 1.44 percent (178.46 points) at 12,212.79, while the broader S&P 500 plunged 2.05 percent (27.57 points) at 1,315.44.
The tech-heavy Nasdaq Composite sank 2.74 percent (77.53 points) to 2,756.42.
Prices were sent tumbling as Kadhafi, in a rambling televised speech, threatened to “slaughter” opponents, saying he would fight to the “last drop” of his blood.
The possibility of an impact on Libya’s oil production of around 1.8 million barrels a day – most of it destined for European markets – sent crude prices sharply upward, despite assurances from Saudi Arabia and elsewhere that any tightening of the market could be compensated for.
“Production disruptions in Libya would have a significant impact on Europe – its largest oil export market,” said Kimberly DuBord, Briefing.com.
Airlines – whose stock profits are vulnerable to oil price fluctuations – saw their shares plummet.
United Continental shares ended the day down 9.2 percent, Delta Air Lines was down 6.6 percent, US Airways and American Airlines were both down 5.7 percent.
Bank shares also dropped heavily, with Bank of America losing 3.9 percent, JPMorgan Chase dropping 4.2 percent and Citigroup 4.5 percent.
“The political turmoil boosted the CBOE Market Volatility Index (VIX) – often known as the market’s “fear gauge” – to its loftiest level since late 2010,” said Andrea Kramer of Schaeffer’s Investment Research.
The market fell despite news that a key measure of consumer views, the Conference Board’s consumer confidence index, hit a three-year high.
Instead, the Libya events, news that US housing prices fell 4.1 percent in the last quarter of 2010 from a year earlier, and Wal-Mart’s reporting a poor fourth quarter, seemed to weigh more heavily on the market.
The world’s biggest retailer said that its US same-store sales fell 1.8 percent in the fiscal fourth quarter that ended January 31, despite the overall surge in US consumption during the holiday season.
Wal-Mart shares ended down 3.1 percent at $53.67. Investors seeking a safe haven sent US bond prices higher, with the 10 year Treasury yield falling to 3.461 percent from 3.589 percent late Friday, while the 30 year yield went to 4.605 percent from 4.698 percent.
Bond prices and yields move in opposite directions.