Pedestrians wearing face masks, crossing a road Pedestrians wearing protective masks cross a road in Singapore Jan. 31. (Photo: Wei Leng Tay/Bloomberg)

The spreading coronavirus hasn’t derailed growth in the U.S. or most developed countries, but it is changing economic, bond market and corporate earnings outlooks.

Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, now expects the U.S. 10-year Treasury yield will remain under 2% this year rather than drifting up to 2.25%-2.50%, which she had expected previously. The 10-year yield fell 3 basis points to 1.55% Tuesday. Treasury bill rates were generally unchanged.

“We doubt that interest rates will return to previous levels,” writes Jones in a bond market outlook titled “Coronavirus Changes the Picture.” “The negative economic impact is likely to mean slower global growth and easier central bank policies.” She expects the coronavirus will shave 0.2%-0.4% from global GDP growth, which the IMF had forecast at just 3.3% for this year.

China, the epicenter of the outbreak, “is effectively the world’s factory floor, accounting for 35% of global manufacturing output,” Jones explains, adding that Chinese consumption also plays a large role in driving demand for commodities such as oil and industrial metals and in world tourism. China represents an even larger percentage of the global technology supply chain, about 50%, according to Credit Suisse analysts.

Apple, which depends heavily on Chinese plants for the manufacture and assembling of the iPhone and other products and for their sales to Chinese customers, cut its sales expectations for the quarter on Monday as a result of the spreading coronavirus.

“Worldwide iPhone supply will be temporarily constrained” and “demand for our products within China has been affected,” said Apple in its quarterly update to earnings guidance. Its stock fell close to 2% on Tuesday, almost six times the 0.3% decline in the S&P 500.

Apple’s suppliers have had to close some facilities in China, though it is slowing reopening some, while it has closed stores in the country, along with Starbucks, McDonald’s and many more companies.

“We have no way to discern the significance of supply chain interruptions for everything from vegetables to toilet paper,” writes Carl Weinberg, chief economist at High Frequency Economics, in his weekly note on China’s economy. “At the same time a lot of workers are not being paid during these quarantines and production shutdowns … We have never seen anything like this before: Over 60 million have been quarantined, idling an important slice of the industrial labor force, and therefore output … We just cannot tell yet how bad it will be.”

The coronavirus has infected about 73,000 people and killed more than 1,800. Tens of millions of people have been quarantined as Chinese authorities seek to contain the virus’ spread.

At this point the virus is expected to slow growth in China a full percentage point or more to around 4.5-5% and depress growth in Japan and other Asian nations plus Hong Kong. It’s feared the virus could send Japan into recession following a sharp plunge in fourth-quarter GDP, down 6.3% on an annualized basis.

The impact on the U.S. and other developed markets outside Asia is currently seen as negligible barring a major change in the trajectory and spread of the virus. S&P Global Ratings expects a 0.01% percentage point drop in U.S. GDP as a result of the virus, a 0.1-0.2 percentage point drop in Europe and limited impact on emerging markets.

But its analysts note that “the risks around its baseline coronavirus scenarios are large and skewed to the downside. If the virus is not contained in the assumed time period it would spread faster and wider,” which would have “larger human costs … [and] could potentially have more widespread economic costs, reflecting the network complexities in the global economy.”

“We will be watching this carefully,” Federal Reserve Chairman Jerome Powell testified before the House Financial Services Committee last week, echoing the sentiment of many economists, strategists, analysts and investors.

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