Fears over the escalating nuclear crisis in Japan overtook financial markets around the globe Tuesday, pushing stocks and other investments lower. The Japanese stock market lost 10 percent of its value, and Wall Street dropped steeply before bouncing back.

The Japanese Nikkei average fell to its lowest level in nearly two years after the country's prime minister said four crippled reactors at a nuclear power plant on the country's devastated coast were leaking dangerous amounts of radiation.

In the U.S., the Dow Jones industrial average fell almost 300 points at the opening bell. The futures market, which can indicate how stocks will perform, looked so ugly before trading began that the New York Stock Exchange invoked a special rule to smooth volatility.

The Dow recovered somewhat later in the day but still closed down 138 points, or more than 1 percent.

"It's a situation where you sell first and ask questions later," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners.

Investors sold stocks primarily because of fear that the disaster in Japan would slow down the global economy. Japan is the world's third-largest economy, manufacturing goods from computer chips to automobiles, and buys 10 percent of U.S. exports.

The jarring day came less than a week after the two-year anniversary of the low point for the markets after the 2008 financial crisis. Stocks have almost doubled in value since March 9, 2009.

Over the last five trading days, however, the Standard & Poor's 500 index has nearly lost 3 percent because of higher oil prices, signs of weaknesses in China's economy, and the still unknown impact of the quake and tsunami in Japan.

"Markets are going to remain on edge until we know the full extent of the situation in Japan," said Michael Ryan, chief investment strategist with UBS Wealth Management.

The Japanese markets have taken a huge hit since the quake and tsunami struck last week. The Nikkei average fell a staggering 10.6 percent Tuesday, more than 1,000 points, and has suffered its worst two-day loss in 40 years.