By Caitlin McCabe 

Investors around the world retreated from stocks and piled into haven assets including government bonds and gold, reflecting escalating worries that the coronavirus will disrupt the global economy.

The Dow Jones Industrial Average dropped more than 1,000 points -- its biggest point decline in more than two years; the yield on the benchmark 10-year Treasury note approached a record low; and gold prices climbed for the eighth straight session to a seven-year high.

Shares of travel, health insurers and highflying technology stocks were among the hardest hit. American Airlines Group dropped 8.5%, UnitedHealth Group slumped 7.8% and Facebook fell 4.5%.

U.S. stocks had been relatively resilient in the wake of the epidemic. But fears about contagion rattled investors after a surge of cases outside China was reported over the weekend, prompting concerns about new pockets of infection in Italy, Iran and South Korea. Global health officials said Monday that the number of cases world-wide has surpassed 79,000. More than 2,000 have been confirmed outside of China.

The epidemic, which has curtailed Chinese manufacturing, exports and consumption this year, is threatening to damp global growth as factories world-wide depend on a supply chain tethered to China. Officials and economists are warning that an extended Chinese shutdown could cripple global manufacturing and cost the world up to $1 trillion in lost output.

"With the developments we saw over the weekend -- more cases, more people getting sick without coming into contact with people from China -- I think it's opened the eyes of the investment community and it opened the eyes of the World Health Organization," said Carter Henderson, a portfolio manager at Pittsburgh-based Fort Pitt Capital Group.

"We don't know how or why this virus is spreading," he said.

The blue-chip index fell 1,031.61 points, or 3.6%, to 27960.80, only the third 1,000-point drop in its history. The S&P 500 dropped 111.86 points, or 3.4%, to 3225.89, with all 11 sectors posting declines. Both indexes lost their gains for 2020.

The technology-heavy Nasdaq Composite suffered the steepest losses, retreating 355.31 points, or 3.7%, to 9221.28, as investors dumped some of the momentum shares that have powered the long-running rally in U.S. stocks. The index is hanging on to a 2.8% gain for the year.

The S&P 500 and Nasdaq had set records as recently as last Wednesday but have dropped 4.7% and 6.1%, respectively, over the past three sessions. The Dow industrials are off 5.4% from their Feb. 12 record.

The U.S. selloff followed sharp declines overseas. Germany's DAX, the benchmark for Europe's industrial powerhouse, dropped 4%. In South Korea, the benchmark Korea Composite Stock Price Index, or Kospi, closed down 3.9%

Even now in the midst of the epidemic, few economists have called for an imminent recession in the U.S. Plus, many investors are hesitant to pull out of the stock market after a decadelong bull run that has encountered a number of obstacles -- among them a trade war, a currency crisis in Europe and a slowdown in global growth -- only to resume its upward march.

The Federal Reserve's three interest-rate cuts last year boosted faith that the central bank will step in, if needed, to support the economy. Federal-funds futures used by traders to place bets on interest-rate policy show a 85% chance the Fed will lower rates at least once by the end of July, up from 39% a month ago.

Energy and technology stocks posted the biggest declines in the S&P 500 Monday, both falling more than 4%. Oil company Hess slid 6.5% as Brent crude dropped 3.8% to $56.30 a barrel. Graphics-chip maker Advanced Micro Devices fell 7.8%.

Airlines and travel-related stocks were hit particularly hard. Norwegian Cruise Line Holdings dropped 9.3% and Booking Holdings, the operator of Priceline and Kayak, declined 7.1%.

The flight from stocks coincided with a rush into haven assets. Gold prices rose 1.7% to $1,672.40 a troy ounce, the highest level since Feb. 6, 2013. Increased demand for U.S. government bonds sent the yield on the benchmark 10-year Treasury note down to 1.377%, approaching the 2016 all-time closing low of 1.364%, according to Tradeweb.

"The rally of haven assets such as gold reflects surging demand for safety during a time of uncertainty," said CMC Markets analyst Margaret Yang. "Things will probably get worse before it gets better."

Volatility also returned in force to the stock market. The Cboe Volatility Index, or VIX, jumped to 25.03, its highest level since Jan. 3, 2019. The options-based gauge tends to rise when markets fall and investors reach for insurance-like contracts to protect their portfolios.

Portfolio managers and investors Monday suggested that investors may have originally been too sanguine about the health of financial markets, buoyed in part by positive consumer data and the trade deal reached between the U.S. and China in January. Corporate earnings largely beat expectations, too, even as the coronavirus was raised as a topic of concern on dozens of recent earnings calls. For weeks, however, it appeared that the virus was mostly contained within China's borders.

Chris Zaccarelli, chief investment officer for Charlotte, N.C.-based Independent Advisor Alliance, said Monday that it was "unrealistic to think that the virus would remain contained."

And as reports emerged of a rapidly growing number of coronavirus cases in Italy, South Korea, and Iran over the weekend, economists said many investors are beginning to worry: Will another country and economy look like China in the coming weeks?

"The markets are starting to fear that Europe is where China was at the end of December," said Seema Shah, chief strategist at Principal Global Investors, referring to early reports of illnesses in Wuhan at the end of 2019. "In two months time, will they be where China is today with the number of deaths?"

--Chong Koh Ping and Anna Isaac contributed to this article.

(END) Dow Jones Newswires

February 24, 2020 17:20 ET (22:20 GMT)