US STOCKS-Wall Street tumbles as virus fears hit California


* Shares of airlines, cruise liners lead declines

* Bank stocks track a fall in U.S. Treasury yields

* HP Inc falls after rejecting Xerox’s sweetened bid

* Indexes down: Dow 2.09%, S&P 1.91%, Nasdaq 1.52% (Adds comment, details; Updates prices)

By Medha Singh and Sanjana Shivdas

March 5 (Reuters) – U.S. stock indexes fell sharply on Thursday as the swift spread of the coronavirus in the United States led California to declare an emergency, while airline stocks were hammered by crippled travel demand.

The S&P 500, which fell almost 12% last week, its worst since the 2008 financial crisis, had recovered some poise as Joe Biden’s surge in the Democratic primaries distracted traders from the widening impact of the virus.

The benchmark index, however, is still about 9% below its record close on Feb. 19 and fears about the economic fallout remain at the forefront of investors’ minds.

The U.S. death toll from the outbreak rose to 11 and California reported the first fatality outside Washington state, a day after lawmakers approved an $8.3 billion bill to combat the outbreak.

The CBOE Volatility index, Wall Street’s fear gauge, rose 2.5 points to 34.54.

“With bonds surging and yields at historic lows, concerns are we will get some kind of economic slowdown and it may be worse than initially factored in,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

The benchmark U.S. Treasury yield hit a record low as traders bet on further monetary easing after an emergency interest rate cut by the Federal Reserve earlier this week.

The S&P 1500 Airlines Index down shed 5.8% after the International Air Transport Association flagged a potential $113 billion hit to global airline revenue.

U.S. airline Southwest slipped 3.9% after issuing a revenue warning, while United Airlines and JetBlue Airways cut flights and implemented cost controls.

Cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line Holdings sunk between 10.5% and 13.3% as health officials screened people on a ship linked to the death in California.

At 11:11 a.m. ET, the Dow Jones Industrial Average was down 567.20 points, or 2.09%, at 26,523.66, the S&P 500 was down 59.83 points, or 1.91%, at 3,070.29. The Nasdaq Composite was down 137.28 points, or 1.52%, at 8,880.81.

All the major S&P sectors were in the red with technology stocks and interest-rate sensitive financials sector weighing the most on the benchmark index.

Recent data have signaled underlying strength in the domestic economy. Official figures on Thursday showed weekly jobless claims fell last week. All eyes will now be on the crucial non-farm payrolls report due on Friday.