Fear dominated financial markets again on Thursday, and stocks fell sharply on worries about the fast-spreading virus outbreak. It's the latest shudder in Wall Street's wildest week in more than eight years.

The Dow Jones Industrial Average sank 968 points, or 3.6 per cent wiping out most of its surge of 1,173 points a day earlier.

The Toronto Stock Exchange lost 225 points or more than 1.3 per cent to close at 16,554.

Markets have been stuck on an up-and-down roller coaster for weeks because of uncertainty about how much damage the outbreak of the new coronavirus will do to the global economy.

Thursday's slide nearly wiped out the surge that stocks had ridden just a day earlier, in part on hopes that more aggressive moves by governments and central banks around the world could help contain the economic fallout.

These vicious swings are likely only to continue, as long as the number of new infections continues to accelerate, many analysts and professional investors say. The S&P 500 is on track to move more than 2 per cent a fourth straight day, the first time that would have happened since the summer of 2011.

Short sellers, who make money by betting the market will go down, have had a field day amid all the volatility. Research published Wednesday by analytics firm S3 Partners shows short sellers have made $50 billion US from the sell off since it began last week.

Short sellers have racked up huge gains by betting against the prices of companies like Tesla, Amazon, Visa, Boeing and Delta during the current market uncertainty

"When the markets rebound as the coronavirus effect wanes, we will probably see a pullback in short selling in some of these names as shorts cover to realize their profits," S3 said.

The growing understanding that the spread of infections may not slow anytime soon is pulling sharply on markets. That pull has taken turns this week with the increasingly worldwide push that authorities are trying to give markets through spending plans and interest-rate cuts.

"It's been a roller-coaster market in recent days for equity investors, and today we appear to be on the downward leg for that ride," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "What you need is time, and unfortunately that is still going to result in volatility."

In China, where the number of new infections has been slowing drastically, Shanghai-traded stocks have rallied nearly 12 per cent since hitting a bottom on Feb. 3. They're just 1.4 per cent below their highest level since the new virus began to spread late last year.

Factories in China are gradually reopening, and a return to a sense of normal life may even be on the horizon following swift and severe actions by the government to corral the virus.

But elsewhere in the world, the mood is much darker. There are about 17 times as many new infections outside China as in it, according to the World Health Organization. Widening outbreaks in South Korea, Italy and Iran are responsible for the majority of new infections.

In the U.S., the death toll climbed to 11 due to the virus. California declared a statewide emergency late Wednesday. Southwest Airlines on Thursday warned its investors that it's seen a significant decline in demand in recent days and an increase in customers cancelling trips.

"The Western world is now following some of China's playbook, closing schools and declaring a state of emergency for example, but there is a sense that this is too little, too late," said Chris Beauchamp, chief market analyst at IG.

Travel-related companies continued to fall sharply on worries that frightened customers won't want to confine themselves in planes or boats with others. Royal Caribbean Cruises sank 15.8 per ent, Carnival fell 13.2 per cent and American Airlines Group lost 11.1 per cent.

It's a sharp turnaround from earlier this year, when a resilient stock market kept climbing to new highs on the hopes that the virus may remain contained in China and be just a short-term challenge.

Now that a growing list of companies are warning about how the virus is hitting their sales and profits, investors are left with a lot of uncertainty about just how much economic growth and corporate profits will be affected.

"We could probably drive a metaphorical truck between the upside and downside cases here," said Jason Pride, chief investment officer for private wealth at Glenmede.