Boeing’s Turbulence Rocks Dow as Attention Shifts to Corporate Earnings
U.S. stocks came under pressure Monday, with the Dow lagging the broader market after analysts at Bank of America slashed their outlook on Boeing Co (BA), the index’s largest component by weight. A downbeat earnings outlook and shaky economic fundamentals also added to investors’ worry that the latest rally in stocks may have been overdone.
Dow Lags Broader Market
The Dow Jones Industrial Average declined by as much as 185 points at the start of the week. It would eventually pare losses to settle down 83.97 points, or 0.3%, at 26,341.02.
The broad S&P 500 Index of large-cap stocks narrowly avoided its first drop in eight sessions. The index rebounded in the final hour to finish 0.1% higher at 2,895.77. Five of 11 primary sectors reported gains, led by consumer staples and information technology.
Meanwhile, the technology-focused Nasdaq Composite Index advanced 02.% to close at 7,953.88.
Boeing Sees Renewed Turbulence
Shares of Boeing Co extended their slide amid news that the aircraft manufacturer was planning to cut production of its 737 MAX by a fifth. The announcement, which was issued Friday, comes amid a lengthy investigation by the Department of Transportation into the certification process of the 737 fleet.
The investigation has put the Federal Aviation Administration (FAA) in the hot seat for not identifying a fatal flaw in the aircraft’s sensor and Maneuvering Characteristics Augmentation (MCAS). That flaw is said to be responsible for two deadly crashes that killed 346 people in less than five months.
Boeing’s stock plunged 4.5% on Monday. The stock has been in recovery mode for the past two weeks after plunging nearly 18% between March 1-22. That selloff wiped $46 billion off Boeing’s market cap.
Earnings Season Begins
Wall Street’s corporate earnings season kicks off in earnest this week, with JPMorgan Chase & Co (JPM) and Wells Fargo & Co (WFC) due to to report Friday. For the first time since 2016, S&P 500 companies are expected to see their earnings decline year-over-year. According to FactSet, the bulk of the declines will be concentrated in energy, materials and information technology companies.
Earnings are set to decline at a time when the global economy is is experiencing a synchronized slowdown affecting both advanced and emerging nations. So far, the United States has managed to weather the storm but it too has come off its highs from early last year. U.S. GDP growth has slowed significantly in the last two quarters but remains well above many of its advanced industrialized peers.
Featured image courtesy of Shutterstock. Chart via Stockcharts.com.