Fed comments rescue Wall Street from deeper Japan selloff

US stocks fell 1 percent but ended far from session lows on the Federal Reserve's more upbeat economic view and growing sentiment that Japan's nuclear crisis would only temporarily depress shares.

The Dow Jones industrial average was down 137.74 points, or 1.15 percent, at 11,855.42. The Standard & Poor's 500 Index was down 14.52 points, or 1.12 percent, at 1,281.87. The Nasdaq Composite Index was down 33.64 points, or 1.25 percent, at 2,667.33.

European shares fell to a 3-1/2 month closing low as investors fled risky assets amid concerns of a nuclear crisis in Japan, with further pain seen for sectors such as luxury goods which rely on Japanese demand

The pan-European FTSEurofirst 300 index of top shares closed down 2.2 percent at 1,084.70 points, its lowest closing level since Nov. 30, 2010, after recouping some hefty losses in late trading

Japan's Nikkei share average plunged 10.6 percent, posting the worst two-day rout since 1987, as hedge funds bailed out after reports of rising radiation near Tokyo. Many mutual funds were left on the sidelines, leaving them poised to dump shares into any rebound.

The yen tripped on talk of intervention by authorities trying to contain the economic impact from last week's devastating earthquake and tsunami, but then recovered. Government bond yields rose as investors sold debt to offset stock market losses.