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February 26, 2024

Stocks Mixed as Boeing Plunges, Weighing on Dow; Nasdaq Rallies

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Jan 8, 2024

Boeing shares plunge after FAA grounds 737 MAX jets

Boeing’s stock tumbled over 5% in premarket trading after the FAA ordered the company to ground all 737 MAX 8 and MAX 9 aircraft following two deadly crashes in less than five months that killed 346 people combined (1). The move lead Boeing to fall by over $28 per share, dragging the Dow Jones Industrial Average lower by over 140 points (2).

The grounding order came after new evidence was found at the crash site in Ethiopia that showed similarities to the October crash of a Lion Air 737 MAX 8 that killed 189 people. With the aircraft now grounded indefinitely, Boeing faces massive costs and logistical challenges in addressing the issues, as well as damaged reputation. Alaska Air and Southwest Airlines shares also fell on the news due to uncertainty surrounding cancelled flights and grounded aircraft.

Key Impacts:

- Boeing stock down 5%, cutting 140 points from the Dow
- Airlines face cancelled flights, costs due to grounded planes 
- Boeing faces investigation, costs and reputation damage
- Travel disruption with 737 MAX jets grounded

Boeing has lost over $26 billion in market value since the crash in Ethiopia. While the company maintains the aircraft is safe, it now faces a monumental challenge in proving the safety of its newest model aircraft. Boeing risks large compensation payouts to airlines if it is found responsible for the crashes. This turmoil also benefits rival aircraft maker Airbus.

Nasdaq jumps 100 points as tech stocks rally

In contrast to Boeing’s plunge dragging on the Dow, the Nasdaq Composite gained over 1% in morning trading, lifted higher by big technology stocks like Nvidia and Facebook (3).

Nvidia shares soared after unveiling new gaming graphic chips at a conference on Sunday. Broad gains in other FAANG stocks like Facebook, Apple, Amazon and Google-parent Alphabet also provided a boost. The divergence between the Dow and Nasdaq highlights investors’ appetite for tech and growth stocks amid concerns over slowing economic growth globally.

Noteworthy stock movers:

- Nvidia up over 6% on new gaming chip announcement 
- Facebook, Apple, Amazon gain over 1%
- Boeing plunges over 5%, dragging the Dow down

With gains concentrated in a handful of mega-cap tech names while industrial and transport stocks face pressure, analysts view markets as vulnerable to a potential pullback in growth stocks. Much depends on whether markets can break free from global growth fears that have dragged on stocks in recent months.

Global growth concerns weigh on investors

Global stock markets traded mixed on Monday, with US index futures under pressure after Wall Street notched its worst week in over two months last week (4).

Major World Indices Performance:

| Index | Change | 
|-------|--------|
| Nikkei 225 | Down 0.2% |
| Hang Seng | Down 0.3% | 
| Shanghai Composite | Up 1.9% |
| FTSE 100 | Down 0.3% |
| DAX | Down 0.2% |
| CAC 40 | Down 0.1% |
| Dow Futures | Down 0.7% |
| S&P 500 Futures | Down 0.4% |
| Nasdaq Futures | Up 0.2% |

A sharp plunge in oil prices has also unsettled markets, with crude oil dropping over 2% early Monday extending last week’s losses on worries about global demand. US 10-year Treasury yields slipped to just above 2.6%, revisiting 15-month lows, as investors sought safe assets amid growth worries. The moves all point to anxiety among global investors over a weakening world economy.

Upcoming US inflation data as well as the start of earnings season with big US banks reporting this week could be the next catalysts to shake up sentiment. Markets expect easing inflation to support the case for the Fed to take a pause in raising interest rates.

So while stocks search for direction amid conflicting signals, volatility is likely. Any indications the US economy can avoid recession in coming quarters would lift some of the gloom hanging over Wall Street.

Outlook for stocks and Boeing

The pressure looks set to continue this week for stocks and Boeing in particular. Investors will watch closely the investigation into Boeing’s MAX aircraft. Further damaging revelations or a prolonged grounding period would weigh heavily on shares. Airlines likely face weeks or months of disruption and costs in reorganizing flight routes and schedules.

Markets also have a busy week ahead with key economic data and the start of bank earnings season. Signs of easing price pressures and continued economic growth would bolster the case for stocks. But any negative surprises on inflation or the outlook from banks would likely further the selling momentum. Boeing and airlines remain vulnerable in this environment.

While the tech sector continues to display relative strength, extended valuations leave stocks prone to profit taking. All told, volatility is liable to pick up with many investors cautious on taking on risk assets near current levels ahead of more clarity on global growth trends. Any trade breakthrough between the US and China would mark the next meaningful catalyst to turn sentiment.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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