NEW YORK—U.S. stocks sank as fears over Japan’s nuclear crisis continued to dominate.

The Dow Jones Industrial Average tumbled 162 points, or 1.4%, to 11694, with all components but Caterpillar in the red.

The Nasdaq Composite dropped 1.4% to 26306, sinking into negative territory for the year. The Standard & Poor’s 500-stock index dropped 01.4% to 1265, with every sector losing ground.

Major stock indexes dropped sharply after Günther Oettinger, the European Union’s commissioner for energy, told a European Parliament committee that one of Japan’s nuclear plants is “effectively out of control,” and that the situation could continue to deteriorate. Mr. Oettinger also said statements by the utility operating the distressed plant and those of the Japanese government were starting to differ.

Traders said the remarks fanned anxieties already simmering in the market.

“In this type of market this news moves quickly — flash-crash-type stuff,” said Joseph Saluzzi at Themis Trading.

Stocks had posted modest losses after housing starts showed the steepest monthly drop in nearly 27 years and new building permits set a record low, an indication that the battered sector continues to be a source of weakness for the economy.

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