Stocks sinking; bond yields plunge

Fear of virus drives drops despite better-than-expected jobs report.

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 sank below 0.70%. 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 3% in afternoon trading, following 3% losses for Europe and 2% losses for Asia. Crude oil lost 10% for its worst day in five years 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 shot up 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, 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 impact mostly China, causing just a short-term disruption with a quick rebound. That’s what happened when SARS hit China and Hong Kong in 2003.

But the virus broke out of China, the number of infections has topped 100,000 worldwide and businesses are reporting hits to their earnings. Apple has said slowdowns in manufacturing iPhones in China is hurting its sales, and 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 outbreak will ultimately get, some investors are simply selling.