* GM to eliminate Pontiac brand; shares rise
* Airlines, oil fall on flu worries
* Indexes off: Dow 0.88 pct, S&P 500 1 pct, Nasdaq 1 pct
(Updates to afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, (Reuters) - U.S. stocks fell Monday
as concerns that a possible global flu outbreak could dampen
optimism about the economy overshadowed a cost-cutting plan
from General Motors Corp and gains in biotechnology stocks.
Wall Street slid in choppy trade as governments around the
world moved to contain the spread of a possible swine flu
outbreak, as a virus that is believed to have killed over 100
people in Mexico spread to the United States and Canada and may
have reached as far as New Zealand.
The Amex Airline Index shed 11.2 percent as
investors worried that travel would be hit be the flu fears.
Among the laggards, UAL Corp, the parent of United
Airlines, gave up 15 percent at $5.47, while Continental
Airlines Inc lost 14 percent to $11.37.
However, the worries were tempered as GM shares
surged 18 percent after the troubled automaker announced a
restructuring that investors hoped would keep the company alive
as it tries to secure government funding.
"There's no question that (the flu outbreak) is affecting
some stocks, such as airlines and restaurants but it's clearly
not a big enough issue to effect the outlook for the global
economy," said said Hugh Johnson, chief investment officer of
Johnson Illington Advisors in Albany, New York.
"The question of what will happen to GM is an ongoing and
substantial story. The message of the market is they may have
done just exactly what they need to to break even."
The Dow Jones industrial average dropped 71.05
points,or 0.88 percent, to 8,005.24. The Standard & Poor's 500
Index dropped 9.78 points, or 1.13 percent, to 856.45.
The Nasdaq Composite Index dropped 16.93 points, or
1.00 percent, to 1,677.36.
On Nasdaq, cell-phone chip supplier Qualcomm Inc
was a bright spot, up 4.4 percent to $43.19 after it swung to a
quarterly loss but raised its full-year revenue target on signs
of market improvement.
Recent data has suggested the recession could be abating,
and quarterly earnings have been less disappointing than Wall
Chevron Corp and Exxon Mobil Corp were
among the heaviest weights on the blue-chip index as June oil
future slid more than 4 percent on flu worries. Chevron was
down nearly 2 percent at $65.33, and Exxon gave up 1 percent at
In contrast, the threat of a flu pandemic triggered by the
new swine flu strain sent shares of drugmakers higher, with
Gilead Sciences climbing 3.8 percent to $47.54.
The Merrill Lynch Biotech Holders ETF
rose 2 percent.
The CBOE Volatility Index, considered to be Wall
Street's fear gauge, rose 6 percent to 39.05.
Jitters over what a government stress test of 19 major
financial institutions might reveal pressured financial stocks,
with the KBW Bank index off 3.5 percent. Wells Fargo &
Co fell 4.8 percent to $20.38 after influential analyst
Richard Bove downgraded the bank to "hold" from "buy."
Also on the earnings front, Dow component Verizon
Communications Inc, the No. 2 U.S. phone company, posted
higher-than-expected profits, helped by its purchase of a
smaller rival and growth in cell-phone customers. Verizon's
shares were down 2.6 percent at $30.19.
(Additional reporting by Leah Schnurr)