By Caitlin Ostroff and Akane Otani 

U.S. stocks fell in choppy trading Tuesday as fears about the economic impact of the coronavirus epidemic kept investors on edge.

The Dow Jones Industrial Average fell 81 points, or 0.3%, to 27879, erasing its initial gain. The S&P 500 lost 0.5% and the Nasdaq Composite edged down 0.3%.

China's cabinet on Tuesday rolled out a string of fresh measures to buoy its economy, including ordering state-controlled banks to issue more loans and cutting taxes for small businesses hit by the epidemic. The State Council also said it would allow firms in Hubei province, the global epicenter of the outbreak, to delay loan and interest payments, and waived taxes for some businesses.

The moves provided investors some reassurance that officials in the world's second-largest economy intend to deploy all measures necessary to help counteract a slowdown in business activity -- although analysts warned that wouldn't change the fact that Chinese consumers are earning and spending less money amid business closures.

"The size of this economic shock is looking increasingly large on a global scale," said James Athey, a senior investment manager at Aberdeen Standard Investments. "What we're just seeing here is the crack in that sentiment-driven equity rally."

Some of the biggest gainers in the stock market Tuesday were companies that had taken a sharp drop Monday.

Technology stocks were mostly higher, with Microsoft up 0.6% and eBay up 0.3%.

Earnings news also drove swings in the market, with Home Depot up 1.4% after reporting better than expected results for the fourth quarter.

Elsewhere, the Stoxx Europe 600 traded down 1.4% after having fallen more than 3% Monday.

In fixed-income markets, the yield on the 10-year U.S. Treasury note was at 1.335% after closing just shy of an all-time low Monday. The decline in bond yields signals ongoing concerns -- at least among bond investors -- about a global economic slowdown as coronavirus cases emerge in new locations, prompting authorities to clamp down on travel and business activity.

Investors have piled into haven assets including government debt in recent weeks, even as equity markets showed resilience in the face of the spreading epidemic. Treasurys appear particularly attractive during times of economic uncertainty as they offer steady interest payments with essentially no risk of default, leading to a drop in yields as bond prices rally.

Any expectation that the Federal Reserve may cut rates can also boost Treasurys by making their yields look more attractive by comparison. Traders are projecting at least one rate cut by the Federal Reserve by June, CME Group data showed on Tuesday.

Investors are likely to continue buying U.S. Treasurys, pushing down their yields as more rate cuts are expected and investors hedge against an economic downturn, analysts said.

"This virus doesn't respect borders. There's no real reason to expect it's going to be easy to contain," said Jan Lambregts, global head of financial markets research at Rabobank. "The real economic impact of this is going to be felt."

Trading in Asia was mixed Tuesday.

South Korea's Kospi closed 1.2% higher, while China's Shanghai Composite Index ended the day down 0.6%. Japan's Nikkei Stock Average, which was closed Monday, fell 3.3%.

Investors drew back from haven assets, with gold falling 1.5% after ending at a fresh seven-year high Monday.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

February 25, 2020 10:53 ET (15:53 GMT)

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