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Five Things We're Watching: March 16, 2011

All eyes on Japan. Here's some of what we're watching -- and which you should too.

Nuclear Worries in Japan: A third explosion at the Fukushima Daiichi nuclear power plant, as well as a fire ablaze on one of the reactor's roofs, led to a dramatic decline in Tokyo stocks

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AP

Tuesday, with the Nikkei 225 closing down more than 10 percent. With the Japanese trading day done, Nikkei futures trading in the US began to rise…though the real story remains the nuclear threat. While authorities get their hands around the astonishing devastation created by the initial quake and tsunami, the ultimate impact of the precarious nuclear emergency is still to be determined. Late Tuesday, reports of a crack detected in the roof of reactor No. 4 surely won't help.

UPDATE: But, that didn't stop the Nikkei from bouncing back strongly at the open Wednesday, up more than 5% in early trading.

World Markets React: US markets showed great resiliency on the first two trading sessions following the earthquake that rocked Japan. But all that changed Tuesday when the fears of a full-blown nuclear catastrophe became more real. Global markets fell across the board, with major US equity indices opening down more than 2 percent before stabilizing.CNBC's Bob Pisani has been following the action on the floor of the NYSE, noting that many traders were caught off-guard, having been postioned for violence in the Middle East: long equities hedged by long gold/oil. Now, traders are left with a new predicament: whether the massive sell-off is a buying opportunity or part of a bigger drop lower on nuclear concerns

Toyota's Twin Worries: The earthquake/tsunami is creating a double headache for the Toyota Prius and the luxury Lexus brand. The current Prius supply is already tight. With higher gas prices, potential Prius buyers are instead looking at other fuel-efficient options. Meanwhile, Lexus is under pressure with very low supply and competitors (BMW and Mercedes) ramping up dealer incentives to boost sales. What does it all mean? CNBC's automotive reporter Phil LeBeau has the story on Wednesday.

Material Inflation: On the domestic front, the continued concern of inflation comes into full focus Wednesday with the release of the February Producer Price Index, measuring wholesale inflation and the impact of rising raw material costs. While core PPI is expected to be up 0.2 percent, the overall number is seen rising 0.6 percent on the strength of elevated energy costs.

Hedging with Home Builders: Beyond the PPI data, markets will be keen to see the February housing starts data: experts expect 570,000 new starts. With credit tight, home builders are having to find creative ways to finance development. The banks won't lend, but the hedge funds will. CNBC's Diana Olick explains, as part of our weeklong Spring Realty Check series.