Stock markets closed lower Monday amid worries that a swine flu outbreak might morph into a full blown pandemic that could derail the economic recovery.

"Caution, I think, is probably the right word," said Fred Ketchen, manager of equity trading at Scotia Capital.

"But you would have expected that, given what we've seen in other parts of the world, and they're all concerned of course about this virus."

Health stocks were a bright spot while General Motors Corp. shares surged as the release of the automaker's restructuring plans raised hopes that GM may avoid bankruptcy.

Toronto's S&P/TSX snapped a four-session winning streak, closing 154.68 points lower at 9,394.8, under pressure from the energy sector and falling crude prices.

The TSX Venture Exchange moved 3.83 points lower to 1,002.98, while the Canadian dollar was down 0.67 of a cent to 82 cents US.

New York's Dow Jones industrial average fell 51.29 points to 8,025 as GM said it will cut 21,000 U.S. factory jobs by next year, phase out its Pontiac brand and ask the government to take company stock in exchange for half GM's government debt.

The struggling automaker, facing a June 1 deadline to restructure, also said it will offer 225 shares of common stock for every US$1,000 in notes held by bondholders as part of a debt-for-equity swap.

General Motors Canada will slash its workforce by more than half to 4,400 by 2014 and close as many as 310 dealerships by the end of next year.

GM shares ran ahead 35 cents or 20.7 per cent to US$2.04.

The Nasdaq composite index was off 14.88 points to 1,679.41 while the S&P 500 index was down 8.72 points to 857.51.

The flu is not yet a global pandemic -- the World Health Organization is operating at level three, with level six a full pandemic.

But there have been 149 deaths, all in Mexico, 20 of which have been confirmed as swine flu and the rest suspected. There have also been confirmed cases in the United States, Canada and Spain.

The virus is striking at a vulnerable time for the stock market and the economy.

Indexes in Toronto and New York have jumped more than 20 per cent from lows reached in early March, and investors are in the middle of a deluge of mixed earnings reports.

Meanwhile, investors are waiting for the results of the stress tests the U.S. government is giving the country's 19 largest banks. Regulators briefed bank officials on Friday about the tests, which will determine which banks may need further help from the government, but the results will not be publicly released until May 4.

"If they are worse than people hoped for, that will bring some more selling pressure into the market," added Ketchen.

"But if they are not quite as bad as people had sometimes talked about, or that they meet expectations that recovery is under way, then I would have to think we're going to resume our move upward here."

The TSX financial sector gave back two per cent. Manulife Financial (TSX:MFC) fell 68 cents to $20.01 and Scotiabank (TSX:BNS) -- which has the biggest presence in Mexico of the big Canadian banks -- lost $1.08 to close at $34.09.

The energy sector fell 2.4 per cent as the June crude contract on the New York Mercantile Exchange lost $1.41 to US$50.14 a barrel. EnCana Corp. (TSX:ECA) was down $1.40 to C$53.88 and Canadian Natural Resources (TSX:CNQ) declined $1.38 to $58.06.