NEW YORK: US stocks fell sharply on Wednesday as a surge in coronavirus cases in the United States fanned fears of a fresh lockdown, with worsening forecasts of the economic damage from the pandemic further denting sentiment.

The United States has recorded the second-largest rise in infections since the health crisis began, with states where restrictions meant to slow the spread of the disease were lifted early witnessing a flare up in cases.

Shares of US airlines, resorts and cruise operators slumped and the S&P 1500 airlines index fell 7.3%. Royal Caribbean Cruises Ltd, Norwegian Cruise Line Holdings Ltd and Wynn Resorts shed between 9% to 12%.

The pandemic was causing wider and deeper damage to economic activity than first thought, the International Monetary Fund said, prompting it to slash 2020 global output forecasts further to 4.9% from 3.0%.

Advanced economies have been particularly hard hit, with US output now expected to shrink 8.0%, more than 2 percentage points worse than the April forecast.

Wall Street's fear gauge, the CBOE volatility index, rose to a one-week high at 35.86.

The S&P 500 and Dow Jones Industrials are just about 10% and 13.7% from their respective February record closing highs.

At 12:52 p.m. ET, the Dow Jones Industrial Average was down 656.54 points, or 2.51%, at 25,499.56, the S&P 500 was down 75.81 points, or 2.42%, at 3,055.48. The Nasdaq Composite was down 208.52 points, or 2.06%, at 9,922.85.