The swine flu gave Wall Street a reason to turn cautious.
The Dow Jones industrial average gave up a midday recovery and retreated about 0.6 percent Monday as the swine flu's death count in Mexico grew to about 150 people from 100.
There have been far fewer cases reported elsewhere, including the United States, and no other fatalities. Investors were also mindful of previous health scares that had only short-term jostling effects on the market including bird flu, Mad Cow disease and the West Nile virus — none of which ever escalated to into global pandemics.
Still, Wall Street decided to hedge its bets as the U.S. cases of swine flu doubled to about 40.
Ryan Larson, senior equity trader at Voyageur Asset Management, said the flu was a "wild card" for the market. "It's still a little bit early to go into panic mode, but it's definitely something that needs to be watched closely," Larson said.
Airline and other travel-related stocks suffered the sharpest losses Monday. The European Union health commissioner advised Europeans to avoid nonessential travel to Mexico and the United States, but the Centers for Disease Control and Prevention in Atlanta said the recommendation was unwarranted.
Craig Peckham, market strategist at Jefferies & Co., called the flu an "easy excuse" for investors to cash in any profits they may have made in recent weeks. The Dow stalled last week, but remains up about 23 percent since its nearly 12-year low on March 9 after better-than-expected earnings and economic reports.
The Dow's losses were mitigated by General Motors Corp., which said it will cut 21,000 jobs by next year and ask the government to exchange GM debt for stock. The bailed-out automaker's announcement did not erase the possibility of a GM bankruptcy, but made it appear a bit less likely.
The Dow fell 51.29, or 0.6 percent, to 8,025.00.
Broader stock indicators also closed lower. The Standard & Poor's 500 index fell 8.72, or 1 percent, to 857.51, and the Nasdaq composite index fell 14.88, or 0.9 percent, to 1,679.41.
The Russell 2000 index of smaller companies fell 9.21, or 1.9 percent, to 469.53.
About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.4 billion shares.
GM rose 35 cents, or nearly 21 percent, to $2.04.
The stocks of airlines, hotels and other travel-related companies suffered heavy losses.
Starwood Hotels and Resorts Worldwide Inc. fell nearly 11 percent, falling $2.27 to $18.55. Cruise operator Carnival Corp. fell $3.84 or 13.5 percent to $24.59, and Delta Air Lines Inc. fell 14.3 percent, or $1.13, to $6.75.
Some pharmaceutical stocks, however, climbed. GlaxoSmithKline gained 7.6 percent, rising $2.22 to $31.56, and Gilead Sciences Inc. rose 3.8 percent, climbing $1.73 to $47.53. The two companies make flu treatments.
Although the swine flu distracted investors somewhat, they were still wary about financial stocks as they awaited the results of the government's stress tests on 19 big banks. The tests are due next Monday, and some analysts said the lack of details about the methodology of the tests is unsettling investors.
Citigroup Inc. fell 12 cents, or 3.8 percent, to $3.07, while Bank of America Corp. slipped 18 cents, or 1.98 percent, to $8.92.
Credit card issuers in particular were "sell" targets. Discover Financial Services fell $1.01, or 11 percent, to $8.08, while Capital One Financial Corp. fell $2.28, or 12 percent, to $16.74. There are growing concerns in the market that more cardholders will default on their balances as the recession continues.
Still, in anticipation of an economic turnaround, many investors like Robert Pavlik, chief market strategist at Banyan Partners LLC, said they have been paring back on traditionally safe stocks like consumer staples and buying more financials and consumer discretionary stocks.
"We are in a downturn, in this slowing economic phase, but it's not as bad as people originally perceived," Pavlik said. "What we're telling our clients is: Don't focus on the last three months."
But others say Wall Street needs more than just evidence that U.S. economy's decline is moderating.
"At a certain point, further gains have to be predicated on things getting fundamentally better, as opposed to less bad," Peckham said.
U.S. government bond prices were mixed. The yield on the benchmark 10-year Treasury note dipped to 2.92 percent from 3.00 percent late Friday. Bond prices move opposite to yields.
The dollar was mostly higher against other major currencies, while gold prices fell.
Light, sweet crude fell $1.41 to $50.14 a barrel on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average rose 0.2 percent. Britain's FTSE 100 rose 0.3 percent, Germany's DAX index rose 0.4 percent, and France's CAC-40 fell less than 0.1 percent.