Investors turn wary on the flu outbreak

NEW YORK - The swine flu gave Wall Street a reason to turn cautious yesterday.

The Dow Jones industrial average gave up a midday recovery and retreated 0.6 percent 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. Even so, investors were cautious over the possible effect of the disease on companies in the tourism, transportation and food industries.

But they also were 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.

So Wall Street decided to hedge its bets as the U.S. cases of swine flu doubled to about 40.

"It's still a little bit early to go into panic mode, but it's definitely something that needs to be watched closely," said Ryan Larson, senior equity trader at Voyageur Asset Management.

Airline and other travel-related stocks suffered the sharpest losses yesterday. 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 fell 51.29 to 8,025.00. Broader indicators also fell. The Standard & Poor's 500 index fell 8.72 to 857.51, and the Nasdaq composite index fell 14.88 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 was 1.4 billion shares.

Starwood Hotels and Resorts Worldwide Inc. fell nearly 11 percent, or $2.27, to $18.55. Cruise operator Carnival Corp. fell $3.84 or 13.5 percent to $24.59.

But some pharmaceutical stocks 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.

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.