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Traders work on the floor at the New York Stock Exchange (NYSE) in New York, March 2, 2020. Photo by Brendan McDermid/Reuters

Stocks fall, bond yields take another breathtaking drop

NEW YORK (AP) — 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 more record lows. The 10-year Treasury yield falls when investors are worried about a weaker economy and inflation ahead, and it fell 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 nearly 2% in morning trading, following nearly 3% losses for Europe and 2% losses for Asia. Crude oil lost 7.2% on worries that producers won’t cut supplies enough to match the falling demand from an economy weakened by the virus. 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.

The number of infections is nearing 100,000 worldwide, people around the world are cancelling travel plans and businesses are reporting hits to their earnings. An interconnected global economy also means many companies depend on suppliers and customers in countries spread around the world, which raises the risk of business interruption as the virus and potential quarantines spread.

MAP: Watch how COVID-19 traveled the world

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 2%, as of 10:58 a.m. Eastern time. It has been a particularly turbulent week, and every day has seen a swing of more than 2%. On Monday, it was up 4.6%, then down 2.8%, up 4.2% and down 3.4%.

“At this point no one can really explain why the markets behave the way they do, and what may be next. The only thing we can say is this high volatility is bad,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

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.

The Dow Jones Industrial Average lost 452 points, or 1.8%, to 25,659. It had been down as many as 894 earlier. The Nasdaq fell 2%.

The S&P 500 had set a record high just two weeks ago, on Feb. 19. It’s lost 12% since then.

READ MORE: Your guide to understanding COVID-19

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 yield on the 10-year Treasury dropped to to 0.76% from 0.92% late Thursday. The 30-year yield fell to 1.32% from 1.57%.

The two-year Treasury yield, which moves on expectations for moves by the Federal Reserve, fell to 0.46% from 0.62% as traders built up bets that the Fed will cut rates deeper to cushion the economic blow from the virus.

The Fed surprised the market earlier this week with a half-percentage point cut, its steepest move since 2008 and also the first move between regularly scheduled meetings since then. Investors expect other central banks around the world to follow suit in hopes of supporting markets.

At the same time, doubts are high about how much effect lower rates can have. Cheaper loans may encourage some people buy cars, homes or make other big purchases, but they can’t get workers back into factories if they’re out on quarantine.

Stocks had climbed earlier in the 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 slowdown in new infections before turning more optimistic.

“It comes down to we just have to have some good news on the coronavirus,” Detrick said.

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