By Joe Wallace

Stocks tumbled Wednesday as pockets of coronavirus infections emerged in several states, adding to concerns about a second wave of cases that could lead to renewed restrictions on business activity.

The Dow Jones Industrial Average fell 501 points, or 1.9%, to 25655. The S&P 500 declined 1.7%, and the Nasdaq Composite lost 1.4%.

New coronavirus cases have jumped in several states, with Arizona, Texas and California reporting daily records of infections Tuesday. Texas Gov. Greg Abbott and Florida Gov. Ron DeSantis said they would step up enforcement of social-distancing guidelines. California Gov. Gavin Newsom said earlier this week that the surge in cases could force the state to implement stricter measures on businesses and social gatherings once again.

"If this does get worse and more endemic, they will have to lock down some of these states again," said Charles Hepworth, an investment director at GAM Holding. That could lead to another drop off in economic activity, threatening the stock market's nascent recovery.

Carnival shares lost 9.1% Wednesday after S&P downgraded the company's credit rating, saying the cruise industry faced a long period of weak demand. Shares of other cruise operators also declined, with Norwegian Cruise Line falling 10%.

Investors' concerns about the rise in infections have in recent weeks been tempered by optimism about stimulus measures from central banks and major governments, reflected in the rally in most major stock markets.

Economists at the International Monetary Fund said Wednesday that the global economy will contract 4.9% in 2020, worse than its previous forecast of a 3% contraction. "The steep decline in activity comes with a catastrophic hit to the global labor market," the IMF said in an update to its flagship World Economic Outlook report.

Elsewhere, European stocks dropped, with the Stoxx Europe 600 falling 2.2%. Germany's Health Minister Jens Spahn said the coronavirus remained a risk after the western state of North-Rhine Westphalia on Tuesday locked down two municipalities following an outbreak at a meatpacking plant. The country's stock benchmark, the DAX, fell 1.7%.

Also weighing on stocks, the U.S. said it was considering imposing tariffs on $3.1 billion worth of products from the U.K., France, Germany and Spain. The warning, which targets products including olives and malt beer, came in a review of the long-running dispute over government subsidies to aircraft manufacturers.

"The tensions between the Europeans and the U.S. have been bubbling under the surface for quite some time," said Jane Foley, head of foreign-exchange strategy at Rabobank. "Anything that suggests there is going to be tension on trade is bad for the global economy."

In Asia, Hong Kong's Hang Seng Index slipped 0.5%, while India's major gauge shed 1.6%. South Korea's Kospi gained 1.4% after North Korea suspended military plans directed against Seoul.

"They're struggling to keep this totally under control," said Paul Jackson, head of asset allocation at research at Invesco, pointing to Germany and South Korea. "What's been more troubling in recent weeks is that globally, the daily deaths have flattened and are now on an upward trend."

Akane Otani contributed to this article

Write to Joe Wallace at Joe.Wallace@wsj.com