* Artillery exchange in Korean peninsula rattles markets * GDP growth revised up in third quarter * Fed sees high unemployment through 2011 * Dow off 1.5 pct, S&P off 1.6 pct, Nasdaq off 1.6 pct * For up-to-the-minute market news see [STXNEWS/US] (Updates prices, adds reaction to FOMC minutes)
By Rodrigo Campos
NEW YORK, Nov 23 (Reuters) - U.S. stocks tumbled on Tuesday as investors dumped risky assets on escalating tensions in the Korean peninsula and as euro-zone debt worries mounted.
South Korea warned North Korea of "enormous retaliation" if
it took more aggressive steps after Pyongyang fired scores of
artillery shells at a South Korean island, in one of the
heaviest attacks on its neighbor since the Korean War ended in
1953. The iShares MSCI South Korea Index Fund
Global stock markets fell, while the search for relative
safety sent the U.S. dollar index <.DXY> up 1.2 percent and
gold
The energy sector of the S&P 500 carried the most losses,
down 2.2 percent as U.S. oil futures prices
"The market is obviously not taking the Korean news very well," said Ralph A. Fogel, investment strategist at wealth management and advisory firm Fogel Neale Partners in New York.
"Equities never like political uncertainties, especially because it is hard to quantify what they mean."
The CBOE Volatility Index <.VIX>, Wall Street's fear gauge, shot up 14.4 percent to 21.01 in its largest daily percentage gain since late June.
The Dow Jones industrial average <.DJI> dropped 170.02 points, or 1.52 percent, to 11,008.63. The Standard & Poor's 500 <.SPX> fell 19.05 points, or 1.59 percent, to 1,178.79. The Nasdaq Composite <.IXIC> lost 41.19 points, or 1.63 percent, to 2,490.83.
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 the 50-day moving average all coincide near that area.
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, known as QE2..
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].
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]. (Reporting by Rodrigo Campos; Additional reporting by Angela Moon; Editing by Jan Paschal)