As a broad sell-off struck world markets Tuesday amid Japan's unfolding nuclear calamity, many professional investors were ready to pounce.

At the open of U.S. trading, the Standard & Poor's dropped almost 3 percent led by weakness in insurance and technology stocks along with a 7 percent plunge in industrial giant General Electric Co , which designed the troubled Japanese plant's reactors.

But shares moved off the lows as investors put their money to work and the Federal Reserve Board made encouraging statements about the U.S. economy. The S&P and other broad indexes closed down a little over 1 percent.

We're looking to spend more in Japan, Alex Motola, co-manager of the Thornburg International Growth Fund, said on Tuesday. You can't easily set aside the human element in a tragedy like this but as an investor you've got to find the best place for your capital.

KASS AND SASS AND OAKMARK, TOO

Other investors, including prominent money managers Doug Kass and Martin Sass, are looking for buying opportunities.

Among mutual fund companies, Oakmark Funds has been active in the market, said Rob Taylor, co-manager of international and global portfolios. The $3.7 billion Invesco International Growth Fund has also been buying. Neither firm disclosed the specific stocks it bought.

Stocks in Japan finished 10.6 percent lower on Tuesday after falling 6.2 percent on Monday as the troubled situation at the Fukushima reactor developed. The crisis escalated when operators of the facility said one of two blasts had blown a hole in the building housing a reactor, releasing spent nuclear fuel into the atmosphere.

The nuclear issues come as Japanese officials are still assessing the full extent of destruction from Japan's earthquake and tsunami, with at least 10,000 people feared dead.

Few U.S. investors saw a long-term problem for world markets in the Japanese maelstrom.

U.S. stocks, down about 5 percent since February 18, have already priced in many risks such as the weak economic recovery, according to Ken Taubes, chief investment officer of Pioneer Investments in Boston.

There is no clear reason that the U.S. ought to be weak in the face of what's happening in Japan, Taubes said. It's an industrialized, sophisticated country that is going to rebuild quickly once they get their nuclear installations under control.

Rebuilding might even spur some new business for U.S. firms, he added.

Such sentiments helped shares of GE rebound from steep losses earlier Tuesday, as investors determined the company had little potential legal liability and nuclear-related revenues comprise a tiny portion of its business.

Once the crisis passes, Japan will need to add power capacity and GE's gas-driven turbines could benefit from increased investment, some advisers said.

Greg Ghodsi, a financial adviser at Raymond James Financial in Tampa, Florida, said he's still holding GE shares accumulated last year because of its nearly 3 percent dividend yield.

It was hit because people don't know if there will be some kind of liability, he said. I'm still comfortable with it because of the income.

VIX FOR THE NERVOUS

Still, some investors moved to hedge against further turmoil.

Independent financial adviser John Fiege in Onancock, Virginia, said he bought the iPath S&P 500 VIX Short-term Futures exchange-traded note for some clients. It benefits from an increase in the VIX volatility index, which tends to spike when the stock market drops quickly.

I do not want to hold this position long-term as I expect rising markets over time, Fiege said. But in the short-term, the position will capture some up if stocks go down.

In a sign of investor anxiety, the CBOE VIX volatility index <.VIX> was up 13.7 percent on Tuesday.

Stock involved in the nuclear industry were, not surprisingly, hit hard in early trading trading Tuesday, while alternative energy companies soared. The iShares S&P Global Nuclear Index Fund lost 4.7 percent while the Market Vectors Solar Energy ETF jumped 5.8 percent.

Thornburg manager Motola said he was skeptical about the solar bounce.

Solar has relied on subsidies but a lot of countries have been cutting back, he said. Japan isn't going to be loaded with money for them.

Motola said he's buying beaten-up shares of some Japanese technology companies with strong sales outside of Japan. He declined to name them but the fund has owned Sony in the past.

(With reporting by Ross Kerber in Boston and Joe Giannone and Helen Kearney in New York)(Editing by Jed Horowitz)

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