By Avantika Chilkoti and Alexander Osipovich 

Major U.S. stock indexes slid Thursday as concerns mounted that the coronavirus outbreak could have more of an impact on corporate earnings and global growth than investors initially believed.

The Dow Jones Industrial Average fell 165 points, or 0.6%, in early-afternoon trading. The S&P 500 dropped 0.6%, while the Nasdaq Composite declined 1%. All three indexes have posted double-digit gains over the past year and set repeated highs in recent sessions.

For the most part, investors have shrugged off the outbreak that has killed more than 2,100 people and infected more than 74,000, mostly in mainland China. When the outbreak erupted into the headlines last month, many analysts expected markets to follow the pattern of past pandemics, such as severe acute respiratory syndrome, in which stocks sold off sharply at the outset, only to rebound once the rate of infections slowed.

But now doubts have set in as some analysts question whether investors have been too sanguine in their reaction.

"People are saying, 'Wait a minute, is China going to get back to business as quickly as we thought?'" said David Lafferty, chief market strategist at Natixis Investment Managers.

Although fourth-quarter earnings for companies around the world have generally been viewed as better than or in line with expectations, forecasts for 2020 are being tempered by the impact of the coronavirus outbreak.

Procter & Gamble warned Thursday that the outbreak will have a material impact on its sales and earnings for the current quarter, citing reduced store traffic in China and disruptions to its supply chain. That followed a similar announcement from Apple earlier this week.

Goldman Sachs analysts warned in a research note Thursday that investors may be too sanguine about the resilience of corporate earnings in the face of the outbreak.

"We believe the greater risk is that the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high," the Goldman note said.

Prices for gold and U.S. government bonds rose as investors bought assets seen as havens. Gold futures were up 0.5% to $1,619.50 a troy ounce, trading at the highest level in about seven years. The yield on the 10-year U.S. Treasury note fell to 1.530%, from 1.569% on Wednesday. Bond yields fall as prices rise.

China has stepped up efforts to limit the fallout of the outbreak by lowering both short- and long-term lending rates this week. Its central bank also plans to offer credit support to businesses hurt by the epidemic, while the government earlier in the week pledged other forms of assistance including technological aid in bolstering supply chains.

In corporate news, shares of E*Trade Financial rallied 24% after Morgan Stanley said it is buying the company in a $13 billion deal. Shares in Morgan Stanley dropped 3.6%.

Shares in L Brands gained 1.2% after The Wall Street Journal reported that the company is near a deal to sell control of Victoria's Secret to a private-equity firm in a transaction that values the lingerie brand at about $1.1 billion.

Marathon Petroleum rallied 3.9% after Bloomberg News reported that Seven & I Holdings, the Japanese company that owns 7-Eleven, is in talks to acquire the company's Speedway gas stations for about $22 billion.

Oil prices extended a recent rebound, climbing for the sixth time in seven days after weekly inventory figures showed U.S. crude stockpiles fell less than expected last week. U.S. crude futures rose 0.9% to $53.96 a barrel..

Fresh data from the Labor Department showed the number of Americans applying for first-time unemployment benefits rose slightly last week, but remained at a historically low level. Initial jobless claims rose by 4,000 in the week ended Feb. 15 to a seasonally adjusted 210,000, in line with economists' expectations.

Overseas, the pan-continental Stoxx Europe 600 index sank 0.9%. The Shanghai Composite Index closed up 1.8%, while Hong Kong's benchmark Hang Seng Index lost 0.2%.

Australia's equity benchmark S&P/ASX 200 index, meanwhile, closed at a record for a second straight day, propelled 0.3% higher on the back of strong corporate earnings.

In currencies, the South Korean won lost more than 1% against the U.S. dollar after the number of new coronavirus cases in the country surged to more than 100.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com

(END) Dow Jones Newswires

February 20, 2020 13:46 ET (18:46 GMT)

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