Stocks fell 1 percent on Tuesday as fears of a nuclear crisis in Japan fanned caution in equities and the market looked likely to extend its bearish trend.

The Nasdaq briefly turned negative for the year in a second straight day of losses tied to worries about Japan. Analysts said a break below 1,257 on the S&P 500, the index's closing level for 2010, could signal deeper losses.

The near-term trend has turned bearish, said John Kosar, director of research at Asbury Research in Chicago. If we break down through (1,257)... psychologically, that changes people's perspective on things.

The S&P 500 is down 4.2 percent since the start of the month after having rallied from early September. It is still up 21 percent since September.

But on Tuesday investors dumped stocks for the safety of government bonds and other assets. Prices of U.S. Treasuries rose along with the Swiss franc.

The CBOE VIX volatility index jumped 15 percent after rising as much as 20 percent.

U.S. shares seen as exposed to the Japan disaster as well as economically sensitive stocks fell sharply.

Insurer American International Group Inc slid 2.8 percent at $36.46, while aluminum producer Alcoa Inc lost 2.6 percent at $15.70.

General Electric Co dropped 3.7 percent to $19.19 on concerns the nuclear crisis will cost the company tens of billions of dollars in lost sales and could have potential legal costs or even liability over its nuclear technology.

GE has combined nuclear ventures with Japan's Hitachi Ltd.

The Dow Jones industrial average was down 221.60 points, or 1.85 percent, at 11,771.56. The Standard & Poor's 500 Index was down 24.44 points, or 1.89 percent, at 1,271.95. The Nasdaq Composite Index was down 50.83 points, or 1.88 percent, at 2,650.14.

A Japanese nuclear power plant sent low levels of radiation toward Tokyo, prompting people to flee the capital. Officials and markets were still trying to assess the full extent of destruction from Japan's earthquake and tsunami, estimated to have killed at least 10,000 people.

In light of what could be the worst nuclear crisis since the Chernobyl disaster in 1986, investors questioned the nuclear industry's prospects as shares in the sector slid. The Global X Uranium exchange traded fund fell 13.5 percent to $13.60.

To avoid unsettling markets further, the Federal Reserve was expected to leave monetary policy unchanged when it issues a statement later on Tuesday, said Peter Cardillo, chief market economist at Avalon Partners.

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 1.9 percent to $33.89.

Stocks in Japan slid 10.6 percent, posting their worst two-day losing streak since 1987. European shares dropped 3.2 percent.

U.S.-listed shares of Japanese companies also slumped. Toyota Motor fell 2.7 percent to $79.55.

(Reporting by Caroline Valetkevitch; Additional reporting by Edward Krudy; Editing by Kenneth Barry) )

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