Swine Flu Outbreak Leave Stocks Lower

Growing concern over the earnings picture, the broader economy and the swine flu pandemic weighed on global markets.

In the U.S., stocks ended the day down after being flat most of the morning, as traders wrestled with the potential fallout of another worldwide disease outbreak and what it might mean for the recovery. The Dow Jones Industrial Average dropped 51 points at 8025. The Nasdaq gave up 14 points at 1679, and the S&P 500 lost 8 at 857.

World governments and health institutions scrambled to address the swine flu issue. As many as 149 swine-flu deaths have been reported in Mexico, and 1,614 more people have been diagnosed with the disease. There were estimates the epidemic could cost the global economy as much as $800 billion. 

If governments are forced to invest heavily to combat the spread of the disease, other recovery efforts may take a backseat. That could mean a windfall for pharmaceutical firms with effective flu drugs on the market, including Roche (RHHBY) and GlaxoSmithKline (GSK). The World Health Organization is already holding negotiations with Novartis (NVS) over the development of a vaccine. On the flipside, airlines and other travel firms could take a hit.

For all of the headlines the swine flu inspired, the auto sector was also in play and helped buoy the broader market. General Motors (GM) broke out the details of its restructuring plan, which includes the elimination of the Pontiac brand, an hourly workforce reduction of 21,000 positions and the shutdown of 13 out of GM's 47 plants.

In economic news, even before the onset of the swine flu scare, the recession appeared to have had potentially grave consequences around the world, according to a report released Sunday. The World Bank said that between 55 and 90 million people will be living in "extreme poverty" in 2009. The bank also said is would expand its lending by as much as $100 billion in additional loans over the next three years to support recovery projects.

In Washington, there were some flickers of hope. White House economic adviser Lawrence Summers said the sense of "unremitting freefall" had abated and that some positive economic indicators had offered some hope for a near-term recovery.

On the Nymex, crude oil prices recovered with the broader market. Crude traded down $1.44 at $50.11 a barrel.

World markets were mostly lower on the swine flu scare. In Asia, Hong Kong's Hang Seng lost 2.7%, while Japan's Nikkei picked up 0.2%. In Europe, the FTSE finished up 0.3%.