Stocks slip on flu, bank concerns
Investors worry about the potential economic impact of swine flu, bank 'stress tests' and quarterly results.
NEW YORK (CNNMoney.com) -- Stocks slipped Monday as fears about the impact of swine flu and jitters about the next batch of quarterly results gave investors a reason to retreat after a big rally.
The Dow Jones industrial average (INDU) fell 51 points, or 0.6%. The S&P 500 (SPX) index lost 9 points, or 1%. The Nasdaq composite (COMP) gave up 15 points, or 0.9%.
The Dow Jones Transportation (DJT) average, which includes airlines, fell 4.7%.
Stocks slumped in the first half-hour of trade, turned higher near midday and then slipped again in the afternoon.
Should the disease develop into an epidemic, world economies would be hurt at a time when a global recession is already exerting a crippling impact. Such fears were dragging on stocks.
However, the market was also vulnerable to a pullback anyway, with the recent rally losing steam in a busy week for quarterly results and economic news, and ahead of the results of Treasury's "stress tests" for the largest U.S. banks.
"Airline and hotel stocks are getting hit today and that's appropriate if the swine flu has a big impact on travel," said Brian Battle, vice president at Performance Trust Capital Partners. "But I think we're more concerned that it's the middle of the earnings reporting period and major companies are due out this week."
In addition, there are jitters ahead of the release of the stress tests next Monday. "We need to know who cleared and who didn't, and for those who didn't, what's the federal government going to do about it?"
All three major gauges gained for 6 straight weeks, adding between 25% and 30% on bets that the worst for the economy and corporate profits has already happened. But investors showed some hesitation last week and only the Nasdaq managed to end higher for the seventh week in a row.
"I think this has been a bear market rally and we're likely to see a bigger pull back," said Tyler Vernon, chief investment officer at Biltmore Capital.
"Swine flu will probably have a short-term impact," he said. "But I think it's going to the first shoe to fall in a series of shoes over the next month."
On Tuesday, Pfizer and Bristol-Myers are due to report results. The April consumer confidence report and the S&P/CAseShiller Home Price index for March are both due in the morning as well.
The Federal Reserve Board begins its two-day policy setting meeting Tuesday.
Swine flu: Declared a public health emergency by the World Health Organization, swine flu dragged on markets globally, particularly in Europe.
In the United States, the federal government declared a public health emergency and President Obama called the outbreak a "cause for concern" but not a "cause for alarm."
As many as 103 deaths in Mexico are believed to have been caused by the disease. At least 40 cases have been diagnosed in the United States.
The European Union health commissioner advised Europeans to avoid non-essential travel to both Mexico and the United States. However, the acting director of the Centers for Disease Control and Prevention said such an advisory was unwarranted.
Automakers: On Sunday, Chrysler said it won some key concessions from its union, a critical step as it races against the clock to avoid filing for bankruptcy protection. Chrysler has until Thursday to hammer out a deal with its creditors and Italian automaker Fiat. Chrysler is privately held.
General Motors (GM, Fortune 500) - which has until June 1 to cut debt and avoid bankruptcy - announced a broad restructuring plan Monday. GM will cut 23,000 jobs by 2011, including those already announced in its recent viability plan. The company will also eliminate its Pontiac brand and cut 40% of its dealer network. GM shares rallied nearly 21%.
Quarterly results: Dow component Verizon Communications (VZ, Fortune 500) reported earnings of 63 cents per share, up from 61 cents a year ago. Analysts surveyed by Briefing.com thought income would fall to 59 cents per share. The telecom benefited from its purchase of rival telecom Alltel and growth in customers. Verizon fell 1.5%.
Among other movers, big bank shares slumped, dragging down the KBW Bank (BKX) sector index by 4.9%.
A variety of airlines plunged, lowering the Amex Airline index by over 10%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers two to one on volume of 1.4 billion shares. On the Nasdaq, advancers topped decliners two to one on 2.23 billion shares.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.92% from 2.99% Friday. Treasury prices and yields move in opposite directions.
Lending rates were mixed. The 3-month Libor rate fell to 1.05% from 1.07% Friday, according to Bloomberg.com. The overnight Libor rate rose to 0.21% from 0.2%. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian markets ended mostly lower and European markets ended mixed.
In currency trading, the dollar gained versus the euro and fell against the yen.
U.S. light crude oil for June delivery fell $1.41 to settle at $50.14 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $5.90 to settle at $908.20 an ounce. 
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