US STOCKS-Wall Street drops on rising virus cases, weak economic view

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* Carnival's credit rating cut to junk status by S&P
* Dell jumps on report of spinning off VMware stake
* Dow down 2.91%, S&P 500 down 2.81%, Nasdaq down 2.49%

(Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, June 24 (Reuters) - U.S. stocks fell sharply on
Wednesday as a surge in coronavirus cases in the United States
re-ignited fears of a new round of government lockdowns,
compounding worsening forecasts of the economic damage from the
pandemic further.
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. The governors of New York, New Jersey and Connecticut
announced that visitors from states with high coronavirus
infection rates must self-quarantine for 14 days on arrival.
"Markets have to start taking that seriously as it might
impact the pace of the economic recovery and different states
roll out plans," said Art Hogan, chief market strategist at
National Securities in New York.
"Today was finally the day markets came to terms with the
fact that increasing COVID-19 cases could mean a slower recovery
in the economy."
Shares of U.S. airlines, resorts and cruise operators
slumped. Royal Caribbean Cruises Ltd RCL.N , Norwegian Cruise
Line Holdings Ltd NCLH.N and Wynn Resorts WYNN.O all tumbled
by at least 9% while the NYSE Arca Airline index .XAL plunged
7.04%.
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
U.S. 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 .VIX ,
rose to a one-week high at 37.12.
A slate of better-than-feared economic reports, easing
lockdowns and massive stimulus measures have powered the Nasdaq
to an all-time high and put the benchmark S&P 500 on track for
its best quarterly performance since 1998.
The S&P 500 and Dow Jones Industrials .DJI are just about
10% and 14% from their respective February record closing highs.
The Dow Jones Industrial Average .DJI fell 761.2 points,
or 2.91%, to 25,394.9, the S&P 500 .SPX lost 87.93 points, or
2.81%, to 3,043.36 and the Nasdaq Composite .IXIC dropped
251.87 points, or 2.49%, to 9,879.50.
The biggest decliner among the 11 major S&P sub-sectors was
energy .SPNY , as crude prices slumped on a report showing
another record storage level and the possibility of a drop in
demand on a pandemic resurgence. In addition to coronavirus concerns, Carnival Corp CCL.N
declined 10.90% as ratings agency Standard & Poor's downgraded
its bonds to junk status, forecasting continued weak demand for
the cruise industry. Dell Technologies Inc DELL.N was a bright spot, as its
shares jumped 7.61% after a report said the company was
considering spinning off its roughly $50 billion stake in cloud
computing software maker VMware Inc VMW.N . VMware advanced
2.85%.
Declining issues outnumbered advancing ones on the NYSE by a
8.69-to-1 ratio; on Nasdaq, a 5.86-to-1 ratio favored decliners.
The S&P 500 posted one new 52-week highs and no new lows;
the Nasdaq Composite recorded 39 new highs and 10 new lows.