Stocks Rebound as Traders Find Flu Trade

Stocks bounced back from a swine flu-induced drop Monday as traders scooped up shares of drug makers and pharmacies.

Stocks had opened lower amid worries that the swine-flu outbreak could derail the economic recovery.

The threat of a flu pandemic rose after more than 100 people were confirmed to have died in Mexico from the virus and outbreaks were reported in five U.S. states, including Texas and New York, prompting the U.S to declare a health emergency. Though, no deaths were reported in the U.S.

After a man was diagnosed with Europe's first case in Spain, the EU health commissioner urged citizens to avoid any non-essential travel to the U.S. and Mexico.

That put a dent in travel-related stocks, including American Airlines , Carnival cruise lines and Starwood Hotels .

But some pharmaceutical stocks benefited as traders looked for the flu play.

American depositary shares of GlaxoSmithKline gained more than 5 percent, as the UK drug maker, along with Switzerland's Roche were expected to be the two main beneficiaries from the need for a swine flu vaccine.

Roche traded nearly 9 percent higher in Frankfurt.

American pharmas caught the runoff: Bristol-Myers and Pfizer advanced more than 1 percent.

Drug-store stocks also benefited, including Rite Aid and CVS .

Meanwhile, Credit Suisse downgraded its weighting on the U.S. to "market weight" from "overweight," saying American stocks are expensive relative to their peers and that earnings momentum was middling.

In earnings, Verizon beat expectations, helped by its acquisition of Alltel, and its operating chief said he "has never been more optimistic about the business." But shares fell more than 2 percent.

Cellphone-chip maker Qualcomm swung to a loss, hit by investment losses and legal costs related ot its settlement with rival Broadcom .

Humana reported its earnings more than doubled as its government business got a boost from Medicare Advantage enrollments. The health insurer also raised its full-year outlook.

Whirlpool reported a surprise profit as cost-cutting measures helped offset slumping appliance sales.

Auto makers advanced after General Motors announced plans to cut 21,000 U.S. factory jobs by next year, phase out its Pontiac brand and offered the government GM stock in exchange for half of its debt, as part of a massive restructuring effort.

Meanwhile, Chrysler showed signs of progress with its unionized workers on its battle to stay alive on Sunday with just days left to complete deals to slash labor and debt costs or face bankruptcy.

Bank stocks were mixed after an industry source said the stress-test results showed one bank will require additional capital.

Bank of America and JPMorgan advanced, while Citigroup declined.

The first look at first-quarter gross domestic product comes out later in the week, along with a Fed meeting.

President Barack Obama's economic advisor Lawrence Summers said on Sunday that the sense of "unremitting freefall" has ended and the picture is no longer negative, but rather mixed.

World finance leaders in Washington agreed over the weekend there was a "break in the clouds" of the economic storm but said more measures were needed to ensure an end to the global recession.

A statement from the International Monetary and Financial Committee of the IMF said more action was needed to restore the health of banks and revive lending.

The Dallas Federal Reserve's Texas manufacturing index for April is due out at 10:30 am ET, and the Chicago Fed's Midwest manufacturing index for March is out at 12 pm.

This Week:

MONDAY: Manufacturing reports from Dallas, Chicago Fed branches
TUESDAY: Two-day Fed meeting begins; Case-Shiller home-price index; Richmond Fed survey; Conference Board consumer confidence; Earnings from Pfizer, Bristol-Myers, US Steel and Sun Micro
WEDNESDAY: Weekly mortgage applications; advance Q1 GDP; weekly crude inventories; Fed rate decision; Earnings from Wyeth, Aetna, General Dynamics, Time Warner, Starbucks and Visa
THURSDAY: Weekly jobless claims; personal income/spending; Kansas City Fed report; Fed's Volcker speaks; Earnings from ExxonMobil, AstraZeneca, Cardinal Health, Colgate-Palmolive, Comcast, Ericsson, Kellogg, Motorola, Viacom and MetLife
FRIDAY: Auto sales; Fed's Geithner, Bullard speak; Reuters/Univ of Mich consumer confidence; ISM manufacturing index; factory orders; Earnings from Chevron, Clorox, MasterCard and Simon Property

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