By Caitlin Ostroff and Akane Otani 

U.S. stocks slid in choppy trading Tuesday, wiping out their initial gains, as fears about the economic impact of the coronavirus epidemic kept investors on edge.

The Dow Jones Industrial Average fell 297 points, or 1.1%, to 27667. The S&P 500 and the Nasdaq Composite dropped 1.1%.

Tuesday's selling was broad, dragging all 11 sectors of the S&P 500 lower. It marked just the latest leg of volatile trading for the stock market, which was hit Monday by its biggest wave of selling in two years.

For much of the past several weeks, investors have been fixated on one issue: the potential for a growing coronavirus epidemic to hit economic activity around the world. Although stocks had managed to remain near all-time highs up until last week, bond yields had tumbled and havens like gold had risen to multiyear highs, suggesting investors were reaching for more defensive trades.

Tuesday's selling accelerated after reports showed the disease had spread to new countries, including Switzerland and Austria. Worries about officials' limited capacity to stop the spread of the disease have somewhat offset investors' relief about the Chinese government ordering fresh measures Tuesday to buoy its economy, including ordering state-controlled banks to issue more loans and cutting taxes for small businesses.

"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."

Elsewhere, the Stoxx Europe 600 traded down 1.6% after having fallen more than 3% Monday.

In fixed-income markets, the yield on the 10-year U.S. Treasury note briefly fell to a record intraday low 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 11:28 ET (16:28 GMT)

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