NEW YORK -- Stocks kept falling Friday, and bond yields took more breathtaking drops as a brutal, dizzying couple weeks of trading showed no sign of letting up.
Even a better-than-expected report on U.S. jobs wasn't enough to pull markets from the undertow. It's usually the most anticipated piece of economic data each month, but investors looked past February's solid hiring numbers because they came from before the new coronavirus was spreading quickly across the country.
Fear coursed across borders and across markets. The lowlight was another plunge in Treasury yields to record lows. The 10-year yield falls when investors are worried about a weaker economy and inflation, and it dropped below 0.70% during the morning. Earlier this week, it had never in history been below 1%. It was at 1.90% at the start of the year, before the virus fears took hold.
“The bond market says the monster under the bed is much bigger and scarier than anyone expects right now,” said Ryan Detrick, senior market strategist at LPL Financial.
U.S. stock indexes slumped more than 2% in afternoon trading, following 3% losses for Europe and 2% losses for Asia. Crude oil lost 8% on worries that producers won't cut supplies enough to match the falling demand from a virus-weakened economy. A measure of fear in the U.S. stock market surged 20%.
At the heart of the drops is the fear of the unknown. The virus usually causes only mild to moderate symptoms. But because it's new, health experts aren't sure how far it will spread and how much damage it will ultimately do, both to health and to the economy.
At first, economists expected the virus to largely impact just China, causing a short-term disruption and an ensuing, quick rebound. That’s what happened when SARS hit China and Hong Kong in 2003.
But the virus quickly broke out of China, the number of infections has topped 100,000 worldwide and businesses are reporting hits to their earnings. Apple has said manufacturing slowdowns in China is hurting its sales, and United Airlines is cutting flights in the face of weaker demand. An airline industry group says the outbreak could erase as much as $113 billion in revenue.
The Organization for Economic Cooperation and Development this week cut its forecast for 2020 global economic growth to 2.4% from 2.9%.
Not knowing how bad the viral outbreak will ultimately get, some investors are reacting by simply selling. Many analysts and professional investors say they expect the market's sharp swings to continue as long as the number of new cases accelerates.
The S&P 500 was down 3.1%, as of 2:10 p.m. Eastern time. It has been a remarkably turbulent week, and the index is down less than 1% for the week even after two straight days of big losses. It started off with a 4.6% jump on Monday, then fell 2.8%, rose 4.2% and fell 3.4%.
“At this point no one can really explain why the markets behave the way they do, and what may be next," said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. "The only thing we can say is this high volatility is bad."
If Friday’s moves hold, this will be the first time the S&P 500 has swung more than 2% in either direction over five straight days since December 2008. That was during the depths of the financial crisis, when investors worried that the world’s financial system may melt down.
It was only two weeks ago that the S&P 500 set a record high, on Feb. 19. It’s lost 13% since then.
Two weeks ago, some investors were warning that the market was too expensive. They said corporate profits would need to jump in 2020 to justify the prices. Wall Street at the time was indeed forecasting a solid rise in profit this year, but the virus has now put that under threat.
The bond market sounded the alarm on the potential economic effects of the virus long before the stock market, and yields fell further Friday.
The Fed surprised the market earlier this week by cutting interest rates half a percentage point, its steepest move since 2008. Investors expect other central banks around the world to follow suit in hopes of supporting markets.
“If you have everybody stimulating at the same time, it will help global trade,” said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute.
At the same time, doubts are high about how much effect lower rates can have. Cheaper loans may encourage some people buy cars or make other big purchases, but they can't get workers back into factories if they're out on quarantine.
A boost for stocks came earlier this week after U.S. congressional leaders struck a deal on an $8.3 billion bill to combat the coronavirus, which President Donald Trump signed on Friday. But investors say a slowdown in the economy seems inevitable, and they need to see a deceleration in new infections before turning more optimistic.
“It comes down to we just have to have some good news on the coronavirus,” said LPL Financial's Detrick.
MARKET ROUNDUP:
The Dow Jones Industrial Average lost 586 points, or 2.2%, to 535. It had been down as many as 894 earlier. The Nasdaq fell 3.3%.
The yield on the 10-year Treasury dropped to to 0.75% from 0.92% late Thursday. The 30-year yield fell to 1.28% from 1.57%. The two-year Treasury yield, which moves on expectations for moves by the Federal Reserve, fell to 0.52% from 0.62%.
European markets fell sharply. The French CAC 40 dropped 4.1%. The German DAX lost 3.4%, and the FTSE 100 in London fell 3.6%.
Asian markets were also down, but not by as much. Japan's Nikkei 225 fell 2.7%, South Korea's Kospi lost 2.2% and stocks in Shanghai dropped 1.2%.
Gold rose $4.40 to $1,672.40 per ounce.
Benchmark U.S. crude tumbled $3.81, or 8.3%, to $42.09 per barrel. Brent crude, the international standard, dropped $4.01, or 8%, to $45.98.
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AP Economics Writer Paul Wiseman and AP Business Writer Yuri Kageyama contributed.
