Of course, Negan knows that more people alive in the outside world means more people to grow food, find supplies and other necessary duties, so he definitely not into full-blown genocide.
That said, he is a showman who knows that post-apocalyptic life hardens some survivors to stone, and while a wooden baseball bat can’t always break a stone directly, it can definitely assist in the process.
More than once, too, if need be.
Just to play the devil’s advocate for a second, it IS possible Negan was going to kill two characters regardless of Daryl’s actions, since Negan obviously understands that only killing one of Rick’s people doesn’t really make up for all the Saviors that he lost.