Wall Street retreated in morning trading on concerns that the swine flu may hinder an economic recovery sending stocks and exchange traded funds (ETFs) in negative territory.
The virus is suspected to be responsible for more than 100 deaths in Mexico, minor occurrences in Canada and about 20 occurrences in the United States. What’s so alarming about this flu is that it is a combination of four different flus in one. This is stirring up concerns that tourism and industries related to tourism will be hit hurt and prevent any turnaround in the global economy.
Things are not looking much better for auto maker General Motors (GM). In a move of desperation, the company announced cost cutting measures including slashing an additional 21,000 factory jobs, a complete phase-out of its Pontiac brand and will ask the federal government to take more than half its stock in exchange for half of GM’s government debt as part of a major restructuring that would leave current shareholders with just 1% of the company, reports Tom Krisher and Kimberly S. Johnson of the Associated Press. Additionally, the auto maker is offering the UAW stock for at least 50% of the $20 billion that it must pay a union run trust that will take over retiree health care expenses starting next year.
Things are looking a bit sunnier for GM competitor Chrysler LLC. Chrysler bit the bullet and managed to jump over two hurdles by agreeing on a concession agreement with negotiators for the UAW and winning ratification of its cost cutting deal with the Canadian Auto Workers. Many though that these two hurdles were virtually impossible to get over. However, the auto maker is still not in the clear. They still have a partnership deal between Italian automaker Fiat and an agreement to swap equity for debt with banks and hedge funds that hold $6.9 billion in secured loans to deal with , states Tom Krisher of the Associated Press. Much like GM, Chrysler is doing anything it can to stay afloat.
On a positive note, telecommunications giant Verizon (VZ) reported its earnings grew 5% fueled by demand for its wireless, Internet and TV services. To add icing to the cake, Verizon reported earnings of $0.63/share beating analysts’ expectations by $0.04/share. Despite this good news, the industry dipped a little bit in morning trading. The iShares S&P Global Telecommunications (IXP), was down about 1% in intraday trading and is down about 12% for the year; VZ is 9.8%.
Despite starting the day off on a negative note, the markets have seemed to recover a bit. The Dow Jones Industrial Average is up about 0.5%, the Nasdaq up about 0.2% and the S&P 500 is up about 0.1% in morning trading.
Kevin Grewal contributed to this article.
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