A Boeing stock sign is displayed on a screen on the floor of the New
York Stock Exchange (NYSE) on March 11, 2019 in New York City. PHOTO |
SPENCER PLATT | AFP
Shares of Boeing Co slid 10 percent on Monday after China,
Indonesia and Ethiopia ordered airlines to ground their Boeing 737 MAX 8
planes following the second deadly crash involving the jet in just five
months.
The losses put the stock on course for its
biggest daily fall in nearly two decades, halting a surge that has seen
Boeing’s market value triple in just over three years to a record high
of $446 per share.
Spreads on Boeing’s bonds were also
wider in relatively light trading on Monday morning, according to
capital markets publication IFR.
A Nairobi-bound Boeing
737 MAX 8 operated by Ethiopian Airlines crashed minutes after take-off
from Addis Ababa on Sunday, killing all 157 on board. The same model,
flown by Lion Air, crashed off the coast of Indonesia in October,
killing all 189 on board.
Boeing said on Monday the
investigation into the Ethiopian Airlines crash is in its early stages
and there was no need to issue new guidance to operators of its 737 MAX 8
aircraft based on the information it has so far.
“Boeing
is the big story when it comes to the Dow industrials,” said Randy
Frederick, vice president of trading and derivatives with brokerage
Charles Schwab.
“(It) is the most expensive stock on the index (and) without any
question is going to be the theme for the Dow index today ... but I
don’t see a spillover to any other indexes except airlines.”
Wall
Street has been overwhelmingly bullish on Boeing - 19 of the 24
brokerages covering the stock rate it “buy” or higher, while five have a
“hold” rating.
It is the best performer in the Dow
Jones Industrial Average so far this year, up 31 pct compared with a 9.1
percent gain in the index. The decline on Monday was a major factor in
pulling the index lower.
Concerns
Morgan
Stanley analyst Rajeev Lalwani said there would be concerns of
disruption around safety, production, groundings, and costs, but that
those should all be manageable longer-term.
He said he
was not changing the bank’s positive “overweight” recommendation on
Boeing shares, and that any corrective action the company has to take on
its best-selling passenger plane will likely prove a longer-term buying
opportunity.
Investigators have found the black box
from the fatal crash with both the cockpit voice recorder and digital
flight data, Ethiopian state TV reported on Monday, which should shed
light on the cause of the crash.
Earlier in the day,
China’s aviation regulator grounded nearly 100 Boeing 737 MAX 8 aircraft
operated by its airlines after the crash.
Boeing’s shares lost 12 percent in the weeks following the Lion Air crash last year, but have more than recouped those declines.
They were down 9.6 percent at $381.72 soon after the opening bell, erasing about $32 billion from the company’s market value.
Dallas-based
Southwest Airlines Co - the biggest operator of the MAX 8 fell just
under 2 percent to $50.81, while American Airlines Group Inc which has
24 MAX 8 jets, was up 0.4 percent at $32.05.
Southwest
and American said overnight they remained fully confident in the
aircraft and were closely monitoring the investigation.
Shares of rival Airbus SE were up 0.9 percent in Paris.
Boeing
delivered 806 aircraft last year, missing its target by four jets, but
still retaining the title of the world’s biggest planemaker for the
seventh straight year. European rival Airbus delivered 800 planes in
2018.
The 737 MAX 8 uses LEAP-1B engines made by CFM
International, a joint venture of General Electric Co and Safran SA.
Shares in Safran also fell 1.6 percent on Monday.
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