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Stocks and oil prices tumbled again on Tuesday and the benchmark U.S. debt yield hit a record low, as the coronavirus spread further around the world and investors offloaded risky assets while struggling to gauge the economic impact.

Canada’s S&P/TSX Composite Index suffered its biggest blow in four years, while the S&P 500 posted its largest back-to-back drop since August, 2015, wiping out US$1.7-trillion in market value just this week alone.

“For the first time in a while, we’re finally waking up to the fact that this issue could go on for a while and have a significant impact on Chinese and global economic growth and potentially the United States,” said Randy Frederick, vice-president of trading and derivatives for Charles Schwab in Austin, Tex.

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“When people react to it because they don’t travel or go to restaurants or go shopping, that’ll have an immediate impact on the economy. It depends how long it goes and how wide the spread,” he said.

The market sell-off accelerated early in the North American trading day after the U.S. Centers for Disease Control and Prevention said Americans should begin to prepare for community spread of the disease.

The flu-like virus has now infected more than 80,000 people, 10 times more cases than the SARS epidemic in 2003. Several European countries were dealing with their first infections, feeding worries about a pandemic.

The World Health Organization, however, has said the epidemic in China, where it began in December, peaked between Jan. 23 and Feb. 2 and has been declining since.

The S&P/TSX Composite Index closed down 2.1 per cent, or 385.37 points, to 17,177.37. The sell-off was broad-based, with even the materials sector – which includes gold miners – selling off close to 3 per cent. Unlike Monday, when bullion prices rose as investors sought save-havens, gold fell about 1 per cent on profit-taking, exposing the TSX to the full impact of the race out of global equities.

The Dow Jones Industrial Average fell 879.44 points, or 3.15 per cent, to 27,081.36; the S&P 500 lost 97.68 points, or 3.03 per cent, to 3,128.21; and the Nasdaq Composite dropped 255.67 points, or 2.77 per cent, to 8,965.61.

The latest wave of selling came as more companies, including United Airlines Inc. and Mastercard Inc., warned that the outbreak will hurt their finances. Technology stocks, which rely heavily on China for both sales and supply chains, once again led the decline. Apple Inc. dropped 3.4 per cent and chip maker Nvidia Corp. slid 4.1 per cent.

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Travel-related stocks took another drubbing, bringing the two-day loss for American Airlines Inc. to 16.9 per cent. The large publicly traded cruise operators have also suffered double-digit losses.

The worst-case scenario for investors – in which the virus spreads around the world and cripples supply chains and the global economy – hasn’t changed in the past few weeks. But the probability of it happening has risen, said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

“It’s the combination of South Korea, Japan, Italy and even Iran” reporting virus cases, Mr. Ma said. “That really woke up the market.”

The pan-European STOXX 600 index lost 1.76% and MSCI’s gauge of stocks across the globe shed 2.31%.

Bond markets are increasing betting that central banks will have to ride to the rescue with new stimulus.

Futures for the Federal Reserve funds rate have surged in the last few days to price in a 50-50 chance of a quarter-point interest rate cut as early as April. In all, they imply more than 50 basis points of reductions by year end.

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The indication of falling U.S. rates hit the greenback against a basket of its peers, although the loonie held steady Tuesday.

The rush to bonds dragged yields on 10-year U.S. Treasury notes to a record low of 1.307%. The 30-year bond set a fresh record low at 1.786 and last rose 17/32 in price to yield 1.8135%.

The Canada 10-year bond yield also fell, hitting a low of 1.17 per cent during the Tuesday session - still above lows of just under 1 per cent in 2016. The five-year bond, of which most fixed mortgage rates are priced off in Canada, hit its lowest levels since September of last year.

Treasuries have become “like a black hole sucking in liquidity all over the world because people don’t know how bad the coronavirus is going to get,” said Don Ellenberger, head of multisector strategies at Federated Hermes.

“It’s a market that’s not concerned about value right now, it’s concerned about safety,” he said.

Oil prices continued to fall as demand concerns linked to the virus’ spread outweighed supply cuts.

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U.S. crude fell 3.11% to $49.83 per barrel and Brent was at $54.76, down 2.74% on the day.

Energy companies have been some of the hardest hit on worries that a weakened global economy will burn less fuel. Exxon Mobil is down 10.2% over the last four days, and the slump has wiped away nearly $26 billion in market value.

The chief risk is that the stock market was already “priced to perfection,” or something close to it, before the virus worries exploded, according to Brian Nick, chief investment strategist at Nuveen.

After getting the benefit of three interest-rate cuts from the Federal Reserve last year and the consummation of a “Phase 1” U.S.-China trade deal, investors were willing to pay high prices for stocks on the expectation that profits would grow in the future.

The S&P 500 was recently trading at its most expensive level, relative to its expected earnings per share, since the dot-com bubble was deflating in 2002, according to FactSet.

If profit growth doesn’t ramp up this year, that makes a highly priced stock market even more vulnerable.

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Reuters, The Associated Press, Globe staff

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