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Fear returns to stock market, S&P 500 falls from record

NEW YORK (AP) — Fear swept back through the stock market on Thursday as worries about the viral outbreak in China knocked the S&P 500 off its record high and had it on pace for its worst day this month.

Stocks had started the day off higher following another round of stronger-than-expected reports on the U.S. economy, but the market slumped suddenly in the late morning. The S&P 500 was down as much as 1.3% at one point, Treasury yields fell and the price of gold rose, before the moves moderated in the afternoon.

Market watchers said they didn’t see one clear trigger for the movements, which reminded them of the market’s sudden shifts during the height of the U.S.-China trade war, when stocks would swing sharply following tweets from President Donald Trump.

“You have this push and pull between good U.S. economic data and coronavirus fears,” said Brent Schutte, chief investment strategist at Northwestern Mutual. “You’re playing that back and forth, almost as you were during the trade war, where people were reacting to changes minute by minute.”

Stocks had been pushing higher for weeks, as investors increasingly believed that stimulus and other efforts by central banks and governments around the world could limit the economic pain created by the virus. China’s central bank on Thursday cut its one-year loan prime rate to 4.05% from 4.15%.

But critics said stocks may have run too high, too fast given how uncertain the full impact of COVID-19 will be on the global economy. South Korea’s fourth-largest city, far from the center of the viral outbreak in China, urged residents to stay inside. The worry is that the number of new cases, which has been falling, could re-accelerate.

“Until we get a more definitive sign that the top is in, you’re going to have volatility back and forth and trades off coronavirus headlines,” Schutte said.

KEEPING SCORE: The S&P 500 was down 0.6%, as of 2 p.m. Eastern time, following a roller-coaster day. The index was up 0.1% in the late morning before its sudden shift downward, bottoming out around 11:30 a.m. down 1.3%.

The Dow Jones Industrial Average fell 172 points, or 0.6%, to 29,170, and the Nasdaq was down 1%.

SEEKING SAFETY: In a sign of increased caution in the market, prices for U.S. Treasury bonds jumped. Bond yields fall when their prices rise, and the yield on the 10-year Treasury sank to 1.52% from 1.57% late Wednesday.

The price of gold also rose, up $8.50 to $1,620.30 per ounce. It touched its highest price since early 2013.

VIRAL IMPACT: Besides the toll on human lives, investors worry about how much economic damage the virus will create. It’s already led to sharp drop-offs in manufacturing, travel and other economic activity in China, and the fear is how long that will last and how far it will spread in the interconnected global economy.

The world’s largest shipping company, Denmark’s A.P. Moller Maersk, said Thursday it expects a weak start to the year due to the virus. Air France, meanwhile, said that COVID-19 could mean a hit of up to 200 million euros, or $220 million, for its operating results from February to April.

ENCOURAGING ECONOMIC SIGNS: A survey of manufacturers in the mid-Atlantic region by the Federal Reserve Bank of Philadelphia jumped to its highest level since February 2017. It was much stronger than economists expected.

Another report showed that leading economic indicators in the United States rose more in January than economists forecast.

Thursday’s reports follow other data points this month showing stronger housing-construction activity and jobs growth than markets expected.

MARKETS ABROAD: European markets were lower, with Germany’s DAX losing 0.9% and France’s CAC 40 down 0.8%. The FTSE 100 in London dipped 0.3%.

In South Korea, where authorities reported the country’s first COVID-19 fatality, the Kospi sank 0.7%. Japan’s Nikkei 225 rose 0.3%, the Hang Seng dipped 0.2% and stocks in Shanghai jumped 1.8%.

RICH CRUST: Domino's Pizza jumped24.6% after the company delivered better-than-expected fourth-quarter profit and surprisingly good sales. The company handily beat a key sales measure as it faces increasing competition from food delivery companies like DoorDash. .

BIG DEAL: E-Trade surged23.3%after Morgan Stanley said it will buy the online brokerage firm for $13 billion, one of the biggest deals on Wall Street since the financial crisis. Morgan Stanley fell3.9%. The deal comes less than a year after a vicious fight for customers resulted in discount brokers like E-Trade slashing or eliminating fees. Rival Charles Schwab is in the process of buying TD Ameritrade.

EARNINGS: Investors continued digesting a steady flow of corporate earnings. Zillow Group jumped17.4%and Avis Budget Group also soared13.5%after reporting solid financial results. Online postage provider Stamps.com surged61.5%after blowing away analysts’ forecasts. ViacomCBS fell17.3%and Boston Beer slid8.3%after reporting disappointing results.

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AP Business Writers Damian J. Troise and Yuri Kageyama contributed.

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