US STOCKS-Wall St drops on Korean tension, euro-zone woes

* Artillery exchange in Korean peninsula rattles markets
* Fed sees high unemployment through 2011
* Dow off 1.27 pct; S&P pff 1.43 pct; Nasdaq off 1.46 pct
* For up-to-the-minute market news see [STXNEWS/US]
(Updates to close)

By Rodrigo Campos

NEW YORK, Nov 23 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) sank on Tuesday
as investors dumped risky assets on escalating tensions in the
Korean peninsula and as euro-zone debt worries mounted.

South Korea warned of retaliation if North Korea took more
aggressive steps after Pyongyang fired artillery shells at a
South Korean island, in one of the heaviest attacks in the
area since the Korean War ended in 1953. The iShares MSCI
South Korea Index Fund (EWY.P: ) fell 5.4 percent. For details
see [ID:nL3E6MN0SQ].

The unexpected flare-up increased investor anxiety. The
CBOE Volatility Index (.VIX: ), Wall Street’s fear gauge, rose
12.3 percent, its largest daily percentage gain in more than
three months.

Jeff Kleintop, chief market strategist at LPL Financial in
Boston, said the news reminded traders how easily markets can
be disturbed by geopolitics.

“As we move into 2011, (U.S. President Barack) Obama is
going to be a lot less focused on domestic policy — where we
have gridlock — and more focused on foreign policy, and
confronting some of these regimes. That might mean higher
geopolitical risk premiums going forward,” Kleintop said.

Ireland’s unsteady situation hurt the euro, which also had
contributed to the slump in stocks. The equity market’s tight
link to the euro has broken of late but resurfaces in times of
turmoil. Investors remain concerned about a widening debt
crisis on the continent.

The European Union urged Ireland to adopt an austerity
budget on time to unlock promised EU/IMF funding, while Irish
Prime Minister Brian Cowen rebuffed calls for a snap election
and insisted the budget would go ahead as planned on Dec. 7.
[ID:nLDE6AL2AG].

An index of U.S.-traded shares of Irish companies (.BKIE: )
fell 4.9 percent.

“Now we have sovereigns in trouble being bailed out by
essentially super-sovereigns,” U.S. economist Nouriel Roubini
told Reuters Insider. “But there’s not going to be anybody
coming from Mars or the moon to bail out the IMF or the euro
zone.”

The Dow Jones industrial average (.DJI: ) lost 142.21
points, or 1.27 percent, to 11,036.37. The Standard & Poor’s
500 (.SPX: ) fell 17.11 points, or 1.43 percent, to 1,180.73.
The Nasdaq Composite (.IXIC: ) dropped 37.07 points, or 1.46
percent, to 2,494.95.

Declining stocks far outnumbered advancing ones on the
NYSE by a ratio of about 7 to 2, while on the Nasdaq, three
stocks fell for every share that rose.

The energy sector (.GSPE: ) of the S&P 500 led declines,
down 1.9 percent as U.S. oil futures prices (CLc1: ) fell 0.6
percent to settle at $81.25 a barrel.

Oil giants Chevron (CVX.N: ) and Exxon Mobil (XOM.N: ), each
down about 2 percent, accounted for 15.5 percent of the drop
in the Dow industrials.

The S&P 500 has found strong support around the 1,175
area. The 23.6 percent retracement of the index’s 2010
low-to-high gain, last week’s low and its 50-day moving
average all coincide near that level.

Market reaction was muted to minutes from the Federal
Reserve’s policy-making panel that showed the FOMC considered
even more drastic options to stimulate the economy before it
settled on buying $600 billion in bonds in a second round of
quantitative easing.

Fed officials revised down their forecasts for economic
growth next year, and saw unemployment at higher levels than
they had the last time they issued official forecasts in
June.

Data earlier showed the U.S. economy grew faster than
previously estimated in the third quarter, but a slump in
sales of previously owned homes in October indicated the
recovery remains too anemic to reduce high unemployment.
[ID:nN2399302].

About 7.6 billion shares traded on the New York Stock
Exchange, the American Stock Exchange and Nasdaq, below the
year-to-date daily average of 8.7 billion.
(Reporting by Rodrigo Campos; Additional reporting by Caroline
Valetkevitch and Chrystia Freeland; Editing by Jan Paschal)

US STOCKS-Wall St drops on Korean tension, euro-zone woes