NEW YORK (MarketWatch) -- A deadly swine-flu outbreak took its toll on airlines and cruise operators and rocked markets across the globe Monday, as traders feared a repeat of the SARS epidemic that ravaged Asia six years ago.

With cases spreading across continents, the World Health Organization late Monday raised the level of its alert on the disease to phase 4, two notches below the widespread pandemic level.

Mexico City's streets were empty as an estimated 1,614 people in Mexico contracted the swine flu. At last count, the suspected death toll in Mexico stood at 149, according to an Associated Press report.

The Mexican government has closed schools in Mexico City and nearby states, and the U.S. declared a public health emergency.

Forty Americans have caught the disease in five U.S. states, according to the Center for Disease Control. The CDC said it will also recommend avoiding non-essential travel to Mexico.

In Canada, six cases were confirmed, and suspected cases were found as far as Israel and New Zealand. So far, all the deaths have been limited to Mexico.

On Monday, Spain's government confirmed one case of swine flu and said it was investigating at least 17 others.

The concern is that the disease reportedly has been transmitted not simply from pig to human, but from human to human.

"Given that the virus strain is apparently transmissible from human to human, a feature that none of earlier bird flu outbreaks displayed, there is reason for concern," said analysts from the Swiss brokerage Sarasin.

News of the swine flu spread across markets worldwide Monday morning, starting in Asia and rolling west.

Mexico's IPC equities index slumped as much as 5% before recovering some ground and ending down 3.3%. The Mexican peso plummeted, losing more than 5% against the dollar. See Emerging Markets.

"This is an already dangerous time for financial markets so to have this specter developing right now is certainly just cause for some very real concern," said James Hughes, analyst at CMC Markets in London.

Investors sought refuge in safe-haven currencies, which helped the U.S. dollar and Japanese yen. See Currencies story.

Corn futures earlier slumped about 4% at the Chicago Board of Trade, while soybean futures lost nearly 6%. See full story.

Wall Street's mixed reaction

On Wall Street, the Dow Jones Industrial Average DJIA, +1.30% finished in the red after vacillating between gains and losses.

The broader market was somewhat supported by shares of pharmaceutical firms, as evidenced by the Amex Pharmaceutical Index $DRG -- including potential makers of a vaccine for the swine flu. See Market Snapshot.

All in all, U.S. stocks seemed to handle word of the swine-flu outbreak in stride.

"This is not enough to knock this market down, unless we see something much more significant develop," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.

"If anything, it was an opportunity to bring those drug stocks back to life, after they'd been left for dead in this rally," he said, referring to the stock market's gains of nearly 30% since early March.

Still, concerns that a pandemic could break out and further hit an already fragile global economy kept futures contracts for crude oil and industrial metals such as copper under heavy selling pressure. See Futures Movers.See Metals Stocks.

Travel sector hit

Most of the impact on the market was focused on the travel sector.

Hong Kong, at the heart of a SARS epidemic in 2003, imposed some strict travel regulations. And European Union health officials said people should avoid traveling to affected areas of Mexico and the U.S.

Shares of US Airways Group Inc. LCC, dropped as much as 27%, and UAL Corp. UAUA fell as much as 18% in New York, among a number of U.S.-listed airlines losing altitude. UAL is the corporate parent of United Airlines.

In Hong Kong, China Southern Airlines (1055) slumped more than 14%, while Air France-KLM (AF) dropped more than 6% in Paris. Read more on airline stocks.

It was a similar story for hotel operators. Shares of InterContinental Hotels Group (IHG) IHG, +1.21% and Marriott International MAR, +1.57% both dropped more than 5% in New York.

"Much like SARS did in 2003, this would deal another blow to the travel and leisure industry, as travel gets curbed from current low levels," said analysts at NetResearch Asia.

Meat producers also felt strain, with shares of Smithfield Foods SFD, -5.66% down 12% and Tyson Foods TSN, +1.13% down 9%.

Drug makers on the rise

Drug makers advanced on news of the flu virus. Roche Holding (ROG) RHHBY, -0.66% , the maker of the Tamiflu antiviral, rose more than 3%.

GlaxoSmithKline GSK, +1.06% (GSK), which sells the Relenza anti-flu drug, rose more than 7%.

And shares of Biota (BTA) BTAH leaped more than 80%. The Australian company licensed Relenza to Glaxo and gets royalties on sales. Read Biotech Stocks story.

Both Roche and Glaxo have been in contact with the World Health Organization and U.S. and Mexican officials over potential delivery of stockpiles.