US STOCKS-Wall St tumbles as virus fears hit California

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* Shares of airlines, cruise liners lead declines
* Bank stocks track a fall in Treasury yields
* HP Inc falls after rejecting Xerox's sweetened bid
* Indexes down: Dow 2.62%, S&P 2.43%, Nasdaq 2.12%

(Updates to open)
By Medha Singh and Sanjana Shivdas
March 5 (Reuters) - U.S. stock indexes dropped more than 2%
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.
Down almost 12% last week - its worst since the 2008
financial crisis - the S&P 500 .SPX 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 7.5% 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 on Thursday
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,
jumped 4.61 points to 36.63.
"Volatility is the norm right now as we ascertain how much
economic damage is going to be done in the wake of the
coronavirus epidemic," said Art Hogan, chief market strategist
at National Securities in New York.
U.S. airline Southwest LUV.N slipped 4.3% after issuing a
revenue warning as the outbreak crushes passenger numbers, while
United Airlines UAL.O and JetBlue Airways JBLU.O cut flights
and implemented cost controls. The International Air Transport Association also flagged a
potential $113 billion hit to global airline revenue, sending
the S&P 1500 airlines index down .SPCOMAIR down 5.7%.
Cruise operators Carnival Corp CCL.N , Royal Caribbean
Cruises RCL.N and Norwegian Cruise Line Holdings NCLH.N sunk
between 7.9% and 10.6% as health officials screened people on a
cruise line linked to the death in California.
At 9:48 a.m. ET, the Dow Jones Industrial Average .DJI was
down 710.78 points, or 2.62%, at 26,380.08 and the S&P 500
.SPX was down 76.15 points, or 2.43%, at 3,053.97. The Nasdaq
Composite .IXIC was down 191.55 points, or 2.12%, at 8,826.54.
All of the major S&P sectors were in the red with technology
.SPLRCT stocks weighing the most on the benchmark index.
The rate-sensitive bank sub-sector .SPXBK dropped 4.6%,
while the broader financial sector .SPSY slipped 3.7%. US/
Traders are betting on more monetary easing after an
emergency interest rate cut by the Federal Reserve earlier this
week, further pressuring U.S. Treasury yields. US/
HP Inc HPQ.N dipped 0.6% as the personal computer maker
rejected a raised takeover bid of about $35 billion from Xerox
Holdings Corp XRX.N . Declining issues outnumbered advancers for a 9.21-to-1 ratio
on the NYSE and a 4.84-to-1 ratio on the Nasdaq.
The S&P index recorded four new 52-week highs and 39 new
lows, while the Nasdaq recorded six new highs and 105 new lows.