By Gunjan Banerji,Anna Hirtenstein and Chong Koh Ping 

U.S. stocks and government bond yields fell Friday after new data showed that March was the worst month for job losses since the last financial crisis.

The S&P 500 fell roughly 2.2% as major indexes hit session lows midday. The Nasdaq Composite lost 2.2%. The Dow Jones Industrial Average fell about 500 points, or 2.3%. All three major U.S. indexes are on track for weekly declines.

The monthly jobs report showed that employers shed 701,000 jobs in March, the start of a labor-market slowdown stemming from the coronavirus pandemic. It's a jarring shift for a job market that was booming just a few weeks ago, with unemployment hovering near multidecade lows.

Many investors were bracing for disappointing numbers. The profound effect that the coronavirus is having on people, businesses and markets around the world has been clear in recent weeks.

"I don't think anybody's surprised that it was a terrible month," said JJ Kinahan, chief market strategist at TD Ameritrade. "We know it's going to be brutal. These are hard times."

Friday's report marks the first time since 2010 that employers shed more workers than they added. The Institute for Supply Management's nonmanufacturing survey for last month will also show the impact of social distancing on U.S. service providers.

Still, many were girding for even gloomier figures to be released in coming weeks, as investors analyzed weekly jobless claims and other economic data. The latest monthly jobs report doesn't reflect the millions of unemployment-insurance claims that people filed in the last two weeks of March.

A record 6.6 million Americans applied for unemployment benefits last week -- double the number two weeks ago -- as the country shut down parts of the economy in an effort to contain the virus.

Investors were also wary of fresh data that shows the spread of the coronavirus across the U.S.

"We could be entering the next few weeks of peak fear," said Rusty Vanneman, chief investment officer of Orion Advisor Services. "I think that some of the worst data is yet to come."

A number of measures Friday showed that the pandemic's toll on Americans is increasing by the day. Gov. Cuomo said Friday that New York, the worst-hit state, also saw its highest single increase in deaths since the outbreak started.

As stocks fell, investors turned to the relative safety of government debt. The yield on the 10-year U.S. Treasury note fell to 0.576% after settling at 0.624% in the previous session. Bond yields fall as prices rise.

All eyes are on how long the containment measures rolled out by the U.S. and other countries will last, according to Eddy Loh, a senior investment strategist at Maybank Group Wealth Management.

"The longer the lockdown, the larger the damage. The fear now is the rise of corporate bankruptcies," Mr. Loh said. "We'll be tracking very closely whether the liquidity crisis will become a credit crisis. And the U.S. will be the key driver here."

Despite the relatively modest moves in markets Friday, Kerry Craig, a global market strategist at JP Morgan Asset Management, said he expected the markets to remain choppy.

"A cycle of corporate [earnings] downgrades has yet to come through," he said, adding that consensus expectations weren't yet fully reflecting the impact of the pandemic.

Brent crude, the global gauge of oil prices, rose about 11% to $33.16 a barrel. The Organization of the Petroleum Exporting Countries and its allies are planning to discuss Monday reducing oil production by at least 6 million barrels a day, The Wall Street Journal reported Friday.

On Thursday, Brent leapt 21%, marking its largest one-day percentage gain on record, based on data going back to 1988. President Trump said he expected Russia and Saudi Arabia to agree to cut production. Moscow denied talking to the Saudis, but the kingdom's officials said it would consider substantial output cuts if other nations joined the effort.

Luca Paolini, chief strategist at Pictet Asset Management, said Friday's stock declines show the market is skeptical about oil-production cuts. It would take coordinated action from all the major oil producers, including the U.S., to make a lasting difference.

"If there's an agreement for a production cut, I would see that as a positive," he said.

In Europe, economic data out Friday showed the brutal impact the coronavirus is having on economic growth. Purchasing Managers' Indexes for the services sector in the eurozone fell to the lowest level ever. The pan-continental Stoxx Europe 600 dropped 1%.

"Each additional day of shutdown is incredibly painful from an economic perspective," said Ralf Preusser, head of global rates research at Bank of America Merrill Lynch. The market reaction is relatively muted because bad economic prospects in Europe are priced in, even with data at record lows, he said.

In Asia, major stock indexes were largely flat. The Shanghai Composite Index closed down 0.6%. The People's Bank of China eased monetary policy, indicating that the Chinese economy is still in need of support despite people returning to work. To encourage more lending, it cut reserve ratio requirements for small- and medium-size banks by 1 percentage point and lowered rates for commercial banks' excess reserves to 0.35% from 0.72%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Chong Koh Ping at chong.kohping@wsj.com

(END) Dow Jones Newswires

April 03, 2020 13:59 ET (17:59 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.