Dow Zips Higher After Boeing Dumps CEO & Ignites BA Stock Surge

The Dow zipped higher after Boeing ignited a stock surge by dumping its CEO. Vanguard warns that US stocks face severe risks in 2020.
Posted in: Markets
Published:
December 23, 2019 2:46 PM UTC
  • The Dow rose nearly 100 points on Monday.
  • Boeing stock surged after CEO Dennis Muilenburg’s firing, offsetting ugly manufacturing data.
  • Vanguard warns that investors face coin-flip odds of a stock market correction in 2020.

The Dow Jones sped higher during the last full trading session before the Christmas holiday. But as investors bask in the self-fulfilling prophecy of a “Santa Claus rally,” Vanguard’s top economist warns that the stock market faces severe risks heading into 2020.

Dow Spikes Amid Boeing Surge

Wall Street’s three major kicked off the holiday-shortened trading week on track to close at new all-time highs.

The Dow Jones Industrial Average climbed 92.9 points or 0.33% to 28,547.99, notching its third straight session gain.

The Dow zipped higher, mainly due to a massive recovery from Boeing stock. | Source: Yahoo Finance

The Dow’s rally was headlined by its heaviest component, Boeing. BA shares surged more than 3.5% after the beleaguered aerospace giant fired its CEO, Dennis Muilenburg.

The S&P 500 rose 0.08% to 3,223.85, and the Nasdaq climbed 0.15% to 8,938.64 to round out a positive day for US stocks.

Not even ugly manufacturing data could stunt the bullish mood. Durable goods orders plunged 2% in November, the biggest decline in six months. Economists had expected an increase of 1.5%, but a massive decline in defense-related orders sapped those predictions. Even worse, October’s data were revised downward (+0.2% from an initial reading of +0.6%).

US durable goods orders plummeted to a six-month low. Economists had expected a substantial rebound in this manufacturing metric. | Source: Trading Economics

Stock Market Correction Faces Coin-Toss Odds in 2020

The Dow and broader stock market seem to be closing an already-spectacular 2019 with a “Santa Claus rally,” but investors shouldn’t necessarily expect those gains to continue in 2020.

That’s according to Joseph Davis, the chief economist and chief investment strategist at $5.6 trillion asset manager Vanguard. Speaking with Bloomberg, he warned that there’s a 50% chance the stock market suffers a correction in 2020. (A correction is a pullback of 10% or greater).

“Financial markets run the risk of getting ahead of themselves,” Davis said. “Across the board, expected returns for most strategies are below trailing three-year returns[.]”

Vanguard believes that stocks are priced for 3% GDP growth, even though most economists expect growth to come in around 2% (and some, like ING’s James Knightley, warn that it could be as low as 1.4%).

Additionally, stock market volatility held at “unsustainably low” levels in 2019, which should change in 2020. The CBOE VIX, a measure of implied volatility, is currently fluctuating below 13 after spiking above 30 in December 2018.

This article is edited by Sam Bourgi for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor, or find a factual, spelling, or grammar error, please contact us and we will look at it as soon as possible.

Last modified: January 22, 2020 11:40 PM UTC

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Josiah Wilmoth @Y3llowb1ackbird

Josiah is the US Editor at CCN.com, where he focuses on financial markets. His work has also been featured on Yahoo Finance and Investing.com. He lives in rural Virginia. Connect with him on LinkedIn or email him directly at josiah.wilmoth(at)ccn.com.