US STOCKS-Wall Street tumbles as virus fears hit California

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* 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%

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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 .SPX , 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 .VIX , 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. US/
The S&P 1500 Airlines Index down .SPCOMAIR shed 5.8% after
the International Air Transport Association flagged a potential
$113 billion hit to global airline revenue.
U.S. airline Southwest LUV.N slipped 3.9% after issuing a
revenue warning, while United Airlines UAL.O and JetBlue
Airways JBLU.O cut flights and implemented cost controls.
Cruise operators Carnival Corp CCL.N , Royal Caribbean
Cruises RCL.N and Norwegian Cruise Line Holdings NCLH.N 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 .DJI
was down 567.20 points, or 2.09%, at 26,523.66, the S&P 500
.SPX was down 59.83 points, or 1.91%, at 3,070.29. The Nasdaq
Composite .IXIC was down 137.28 points, or 1.52%, at 8,880.81.
All the major S&P sectors were in the red with technology
.SPLRCT stocks and interest-rate sensitive financials sector
.SPSY 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.
Xerox Holdings Corp's XRX.N fell 4% and HP Inc HPQ.N
0.1% after the personal computer maker rejected a raised
takeover bid of about $35 billion. Declining issues outnumbered advancers for a 5.73-to-1 ratio
on the NYSE and a 3.65-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and 55 new
lows, while the Nasdaq recorded 17 new highs and 172 new lows.