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Stocks Tumble, Bonds Surge on Virus Fears

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Chart: Bloomberg

U.S. stocks tumbled as volatility sparked by the spread of the coronavirus woes continued to grip financial markets. Treasury yields sank to record lows and haven assets surged.

The S&P 500 fell more than 3%, erasing the majority of Wednesday’s steep gains, as wild swings piled up. The benchmark has had the most volatile week since S&P Global Ratings cut the U.S. debt rating in 2011. Banks and tech shares led losses.

Investor confidence has been shaken as cases of the virus continue to multiply across the world’s largest economy despite efforts by authorities to contain the outbreak. The 10-year yield sank to as low as 0.90%, while the dollar plunged against the yen. Gold climbed and oil slid.

“It’s definitely volatile. Once things get to this point, it normally takes a few weeks for things to settle down,” Michael Shaoul, chief executive officer at Marketfield Asset Management LLC, told Bloomberg TV. “All we know now is that we don’t really understand what’s going to happen next. It’s probably four, six, eight weeks before we’re going to have any useful information as to what the trajectory of the virus is or what the actual economic fallout looks like.”

Risk assets have whipsawed this week, with traders still on edge amid a rise in virus cases around the world and governments extending quarantines and travel restrictions. An industry association warned the outbreak could cost airlines as much as $113 billion in lost revenue. The S&P 500 has rebounded since the Federal Reserve pledged action on Friday, but it remains more than 10% below last month’s all-time high.

These are the main moves in markets:

Stocks

  • The S&P 500 Index dropped 3.39% at closing.
  • The Dow Jones Industrial Average fell 3.58%.
  • The Stoxx Europe 600 Index fell 1.4%.
  • The MSCI Asia Pacific Index gained 1.4%.

Currencies

  • The Bloomberg Dollar Spot Index declined 0.3%.
  • The euro climbed 0.8% to $1.1226.
  • The British pound gained 0.7% to $1.2966.
  • The Japanese yen strengthened 1.3% to 106.16 per dollar.

Bonds

  • The yield on 10-year Treasuries sank 14 basis points to 0.91%.
  • The yield on two-year Treasuries decreased 11 basis points to 0.58%.
  • Germany’s 10-year yield fell five basis points at -0.69%.

Commodities

  • West Texas Intermediate crude fell 1.9% at $45.89 a barrel.
  • Gold strengthened 1.9% to $1,674.10 an ounce.

— With assistance from Adam Haigh, Todd White, Katherine Greifeld, Liz Capo McCormick and Claire Ballentine.

— Check out SEC Issues Relief to Fund Boards in Light of Coronavirus on ThinkAdvisor.

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