Headline Risk From Japan Grips Global Markets

The markets are lower in early trading, but for now the lows of the session occurred right at the market open.

Fears about radiation leaks in Japan, in the wake of the earthquake and tsunami, led to sharp losses in the Nikkei, which plummeted -10.6% overnight. The fears led to a global selloff in stocks, and out markets gapped down at the open with the S&P 500 nearly touching 1260.

But stocks have firmed a bit since the open, and the major indexes are currently all down less than 2%. That is probably far less severe than many investors expected following Japan's losses. With the market heavily oversold, bargain hunters could be stepping in to take advantage of some of the declines.

The only areas that are up so far today is the US dollar and Treasuries. Commodities are lower, with oil down below $100 to $97.30, and gold prices also down near $1394. The yield on the 10-year not has fallen back to 3.27%.

The volatility index (VIX), also known as the Fear Gauge, spiked +20% at the open to 25.50, but has since fallen back to 23.85 (+13%).

The big headline risk right now concerns the radiation leaks in Japan, and if the winds start to blow any contamination into more populated areas. Japan is working furiously to cool the affected reactors, but has not made the decision to simply bury the plants, a la Chernobyl.

Trading comment: I have been saying that I wanted to be patient during this correction. I think today's dislocation in stocks is an opportunity to start doing some buying. There are a lot of stocks that recently reported great earnings, with strong fundamentals, that are being sold off due to headline fears. Right now I want to stick with the higher quality stocks, preferably with yield. I think we have more time to let the growth stocks consolidate and build new bases.