Photo: Andrew Burton/Getty Images

As someone has certainly told you by now, the Dow fell by more than 1,000 points yesterday, its worst day in more than two years, erasing all of 2020's gains. Most news headlines assert that the stock market's momentum was finally broken by "coronavirus fears," but that's not the full story.

What's happening: The novel coronavirus has been infecting and killing scores of people for close to a month and, depending on the day, the market has sold off or risen to record highs.

  • The virus has pushed out of China and into Europe, the U.S., much of Southeast Asia and the Middle East, but this was not entirely unexpected and the World Health Organization at a press event yesterday declined to label the outbreak a global pandemic.
  • It's clearly having an impact on business, but it's not yet clear what that impact will be. Further, it's unlikely the market was surprised by these developments.
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Data: FactSet; Chart: Axios Visuals

Thought bubble, via Axios' Felix Salmon: In most cases where there are big stock market moves, there’s no obvious big and surprising event that causes the move.

  • Market reports cite "worries about global growth" or "concerns about the trade war" or (in this case) something something coronavirus. Even though, as we’ve seen, the market is perfectly capable of ignoring coronavirus news.

Of note: The stock market, like most economic indicators, is generally only useful when you step back and look at the trend.

The big picture: Coming into 2020, fund managers expected the stock market to see increased volatility but to ultimately rise by around 5% from its end of 2019 level — the most cited target was for the S&P 500 to end the year at 3300, a mark it had surpassed by Feb. 5.

  • U.S. Treasury yields have fallen consistently, with the yield on the benchmark 10-year note 50 basis points lower than at the start of the year, and yields on the 30-year bond falling to a record low Monday.
  • The yield curve has inverted. Again.
  • Stock traders have consistently "bought the dip" after down days in the market, a strategy that has been incredibly successful over the past decade and is likely to continue.
  • The value of the dollar and gold have risen to three- and seven-year highs, respectively, and seem to be the market's favored safe havens.

At the NABE conference in Washington yesterday a number of economists weighed in on the coronavirus outbreak and market reaction.

What we're hearing: Cleveland Fed President Loretta Mester just smiled and shook her head when I asked her about the market's nosedive during a cocktail reception last night.

  • "It’s one day of a very strong reaction in the market," she told me at a press briefing earlier in the day. "The Fed has to be forward-looking, and we have to just wait and see how things develop."

Go deeper: The global economic threat of the coronavirus

Go deeper

The unmoving yield curve

Data: U.S. Department of the Treasury; Chart: Andrew Witherspoon/Axios

The S&P 500 has gained 24% since April 1, but U.S. Treasuries have been almost entirely unmoved.

Why it matters: Since the Fed announced its QE4ever program (also known as QEinfinity) on March 23, the U.S. Treasury market has been effectively corralled.

The Fed's balance sheet tops $7 trillion

Data: Federal Reserve Bank of St. Louis; Chart: Axios Visuals

The Fed's balance sheet rose to $7.1 trillion as of this week, having now committed a record $2.2 trillion in quantitative easing purchases since chair Jerome Powell's pledge to buy unlimited Treasury bonds and mortgage-backed securities in March.

Watch this space: The massive increase comes despite the fact that many of the central bank's special purpose vehicles set up to buy corporate bonds and loan to businesses are not yet operational.

Coronavirus could lower GDP by $15.7 trillion

Reproduced from Congressional Budget Office; Chart: Axios Visuals

The CBO released projections on Monday for U.S. nominal GDP to be lower by $15.7 trillion over the next decade than its estimate in January as a result of the coronavirus pandemic.

What they're saying: It predicts that when adjusted for inflation GDP will be $7.9 trillion lower over the next decade and down by $790 billion in the second quarter of this year — a 37.7% quarterly contraction.