By Gunjan Banerji and Caitlin Ostroff
Stocks and Treasury yields dropped Friday and precious metals rallied, continuing a winning streak for traditionally safe assets even as riskier ones like stocks hover near highs.
The S&P 500 index fell 0.8% after clinching a record earlier in the week. The Dow Jones Industrial Average lost 177 points, or about 0.6%. The tech-heavy Nasdaq Composite slipped 1.2%.
U.S. stocks are on track for declines this week, while traditionally safer assets like gold and government bonds are headed toward gains, highlighting concerns that the virus could crimp global growth. Gold prices are sitting near the highest levels of the past seven years, while the intraday yield on the benchmark 30-year Treasury yield dropped to a record low Friday.
The week has been marked by mixed signals from different corners of the market. In a sign of how atypical the week has been, the S&P 500 and Nasdaq Composite set records Wednesday, just days before the longer-dated government bond yield fell to a low.
The concurrent gains in precious metals and government bonds this year underscore the jitters that have rattled markets. Typically, investors ditch haven assets like gold and government bonds as stocks crest to fresh highs. This year, they have bought risky and safe assets alike as they have navigated a murky economic outlook.
"It's absolutely unusual from a longer-term historical perspective," said Katrina Lamb, head of investment strategy and research at MV Financial.
Some analysts have attributed the rush for haven assets to the viral epidemic, which has sickened tens of thousands of people and led to shutdown businesses in one of the biggest economies in the world.
"It can really slow down many areas of the economy," said Dev Kantesaria, founder of Valley Forge Capital Management, of the virus.
Meanwhile, lackluster economic data has added to worries that the virus will hamper growth. IHS Markit's flash reading for an economic indicator measuring manufacturing and services business activity fell to its lowest level in more than six years.
Additionally, new data showed that sales of previously owned U.S. homes sputtered in January. Existing home sales decreased 1.3% in January from December.
The yield on the 10-year Treasury note fell sharply to 1.461% in early trading Friday, from 1.524% Thursday as bond prices rose. The yield on the 30-year Treasury note fell a record intraday low before paring some of its declines.
The yield on 10-year Treasurys has traded below the three-month yield since Tuesday as investors seek longer-duration U.S. bonds as a safe investment amid coronavirus fears, said Andrey Kuznetsov, a senior credit portfolio manager at Hermes Investment Management.
"If we are in an environment when we will see a lower-than-expected growth on the back of coronavirus, this will increase demand for low-risk assets," he said.
Gold prices rose about 1.4%, continuing a rally that has sent the precious metal to seven-year peaks.
The worries about the coronavirus come as manufacturing data has disappointed investors. Data from IHS Markit Ltd. showed that new orders received by private sector firms fell for the first time since October 2009, when data collection began. Its U.S. composite purchasing managers index fell to its lowest level since 2013.
Preliminary figures for Japan's February manufacturing activity, meanwhile, showed the sharpest contraction in more than seven years, Deutsche Bank said.
While German figures for manufacturing showed slight improvement, it may be still too early to capture the impact of the coronavirus, said Aila Mihr, a senior analyst at Danske Bank Research. New export orders pointing to how many German goods are being purchased from countries including China remained weak. The figures also showed longer delivery times from suppliers to Germany.
"In the grand scheme of things, we kind of read them as the calm before the storm," Ms. Mihr said. "We don't think we have seen the worst yet."
More than 75,000 people have been diagnosed with coronavirus, and over 2,000 have died globally. South Korea reported its first fatality, while two patients in Iran also died and confirmed cases began to climb in Beijing.
Despite Friday's declines, the stock market has largely remained resilient in 2020 -- powered higher by shares of technology heavyweights -- even as traditionally safer bets have soared. Shares of tech companies have outperformed the S&P 500 this year, rising 9% versus a 3.7% increase for the broad index. It's a sign that investors are hungry for hungry for companies with a high potential for profits, especially as the latest earnings season has revealed roughly flat profits.
"People are desperately looking for organic growth," said Mr. Kantesaria.
Some investors said that the Federal Reserve's three interest rate cuts boosted both stocks and government bonds. Additionally, as government bond yields fall, some investors may be enticed by the higher returns that riskier assets like stocks can offer.
Fed governor Lael Brainard, a top central bank official, said in a speech that interest rates will need to remain at historically low levels for a lengthy period to return inflation to the Fed's 2% inflation goal.
Still, there have been worries that the anxiety in the bond and metals markets could eventually trickle into stocks.
Investors have also been parsing individual earnings releases in recent days. Shares of Deere rose 8% after the tractor and construction machinery maker posted earnings that beat expectations for the latest quarter.
Sprint gained about 6.3% after the wireless carrier and T-Mobile US agreed on new terms for their merger.
Dropbox climbed 22% after the file-sharing service reported quarterly results that beat Wall Street's expectations.
Amrith Ramkumar contributed to this article.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com and Caitlin Ostroff at firstname.lastname@example.org