The Dow barely moved to the upside on Friday as a collapse in Boeing (NYSE: BA) weighed heavily on the U.S. stock market.
A decent day for the Dow Jones was ruined by a miserable performance from Boeing (NYSE: BA) stock, which faces spiraling costs surrounding the grounding of its 737 MAX jet.
Rough macro data gave the stock market more cause for concern. Industrial production, building permits, and Michigan consumer sentiment all missed forecasts.
In line with the weak data, it was a cautious day of trade for the three major US stock market indices. The S&P 500 was the marginal winner, eking out a 0.21% gain while the Nasdaq and the Dow Jones Industrial Average advanced less than 0.1%.
At last check, the Dow had edged 22.73 points or 0.8% higher to 29,320.21.
In the commodity markets, crude oil was up 0.07%, and the price of gold resumed its climb with a 0.67% rally.
As the Dow ranges at record highs, investors have been enjoying de-escalating geopolitical risks alongside robust earnings on Wall Street.
But the disconnect between macroeconomic fundamentals and the stock market has begun to widen.
Friday’s industrial production and building permit data were worse than expected, and Michigan consumer sentiment suffered its first contraction since November. (At 99.1, the reading is still robust.)
In line with their bearish expectations for the U.S. economy, Nordea Research argues that the Dow will have to deal with a resurgence of the “r” word. They believe that recession risks are still on the table, writing today,
Our broader GDP models show a further slowdown in growth ahead, especially in the U.S., and the weakness that has so far concentrated mainly on the manufacturing sector is likely to spill over more to the services side as well.
As a result, we do think that recession worries will return before we see more convincing signs of an improvement in the outlook. We do note, however, that some of the downside risks have been reduced lately.
A mixed day for the Dow 30 could have been much stronger, were it not for a miserable performance from Boeing (NYSE: BA) stock.
The Dow Jones’ most heavily weighted component dove 2%. It’s just 1% higher on the year, and the good feeling from the recent board cull has faded.
What is weighing on Boeing bulls is the fact that the 737 MAX jet is still many months away from returning to the skies. Unfortunately, this not only affects future earning prospects but also creates massive costs that grow by the day.
Bank of America shocked the stock market today with an estimation that BA revenue could be down as much as $20 billion due to the 737 MAX debacle. Alarmingly, this does not even factor in litigation costs, which could be monstrous as lawsuits rumble on for years.
It doesn’t help that the FAA, which will make the final decision on the 737 MAX, discovered recently that Boeing employees regularly mocked them in internal communications.
If the Dow Jones is going to fulfill its potential, it needs Boeing to start performing close to the $100 billion revenue machine it was in 2018. That prospect has never looked further away.
Among the other major Dow stocks, Apple (NASDAQ: AAPL) bolstered the stock market with a respectable 0.4% daily gain. Travelers, Home Depot, and Visa chipped in with 1%+ gains to help keep the index in the green.
Last modified: September 23, 2020 1:30 PM