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U.S. stocks fell into official correction territory on Thursday amid frenzied trading and mounting concerns over the potential economic and corporate damage caused by the spread of the coronavirus. Meanwhile, the Toronto Stock Exchange halted buy and sell orders early because of a technical problem.

The S&P 500 closed down 4.4 per cent to 2,978.76, erasing a tentative comeback in midday trading. It was the benchmark′s biggest one-day percentage drop since 2011.

The total decline from the index’s intraday high on Feb. 19 is now 12.2 per cent – a record-fast correction, defined as a drop of 10 per cent or more, according to Dow Jones Market Data, using numbers going back to 1980.

The Dow Jones Industrial Average fell 1,190.95 points, or 4.4 per cent, to 25,766.64, marking the blue-chip index’s biggest point decline in history.

The downturn follows a period of relative calm this month when markets reflected the belief that the coronavirus outbreak would stay contained within China without causing significant global economic damage.

But with the virus now spreading throughout Europe, Asia and North America, this bet is off – and the prospect of significant quarantines, idled factories and interrupted trade networks is now showing up in reduced earnings forecasts and gloomier economic projections.

David Kostin, chief U.S. equity strategist at Goldman Sachs, slashed his profit expectations for companies in the S&P 500 this year, to a level where he now sees no profit growth because of the coronavirus fallout.

“Our reduced forecasts reflect the severe decline in Chinese economic activity in the first quarter, lower end-demand for U.S. exporters, supply chain disruption, a slowdown in U.S. economic activity, and elevated uncertainty,” Mr. Kostin said in a note.

Canada’s S&P/TSX Composite Index was down 324.48 points, or 1.9 per cent, before TMX Group halted trading on the TSX, TSX Venture Exchange and TSX Alpha because of a technical issue shortly before 2 p.m. (ET), essentially sidelining traders during a particularly volatile time of the day.

"We’re looking at trading at alternate exchanges, but they’re trading at a fraction of the volume,” said Pete Gombocz, managing director of Velocity Trade Capital Ltd.

The carnage was widespread, as major indexes in Europe and Asia also fell sharply. Japan’s Nikkei 225 slid 2.1 per cent and Britain’s FTSE 100 dropped 3.5 per cent.

West Texas intermediate crude oil, a U.S. benchmark, fell 4.2 per cent to US$46.71 a barrel, reflecting lower demand in a slowing global economy.

Capital Economics expects that China’s economy will contract in the first quarter, year over year, for the first time since the 1990s.

“[China’s] leadership appears to be readying significant stimulus, which will probably restore employment and output by the third quarter. But the hit to output during the first half of the year will still probably result in the slowest annual growth in decades,” Martin Rasmussen, an economist at Capital Economics, said in a note.

Royal Bank of Canada strategists noted that Canada’s economic exposure to the coronavirus and its resulting COVID-19 disease is largely limited to lower energy prices and reduced travel, which will shave off 0.2 to 0.3 of a percentage point from first-quarter gross domestic product, in annualized terms, providing another reason why the Bank of Canada could cut its key interest rate this year.

“Today, the negative economic fallout from COVID-19 in Canada will just add to an already soft economic growth backdrop that [RBC economists] think was already putting the Bank of Canada in position to cut the policy rate by midyear,” strategists at RBC Dominion Securities said in a note.

The bond market continues to send worrisome signals about global economic growth. The yield on the 10-year U.S. Treasury bond fell to 1.283 per cent on Thursday, to a new record low. As recently as two weeks ago, the yield was above 1.6 per cent.

Financial markets expect that there is a 54.3-per-cent chance that the U.S. Federal Reserve will cut its key interest rate in March, up from an 8.9-per-cent chance just a week ago, according to CME Group.

Still, a number of observers expect that the current market turbulence will be short-lived, based on market reactions during previous contagious outbreaks.

“It’s reasonable to assume that the recovery from any growth hit would be V-shaped. Past pandemics have not lasted much beyond a quarter, and typically the economic recovery is swift,” Douglas Porter, chief economist at BMO Nesbitt Burns, said in a note.

Mr. Kostin at Goldman Sachs agreed. He argued that production shutdowns and reduced demand will subside as authorities contain the virus, ushering in a rebound later this year.

“Our new baseline earnings forecasts assume the impact of COVID-19 on S&P 500 earnings per share is ultimately short-lived,” Mr. Kostin said.

“As a result, the path of earnings will likely be weak in the first half of 2020 but largely offset by solid growth in the second half of 2020 and 2021."

With a report from Mark Rendell