Boeing’s (BA) Stock Decline Weighs on Dow, ETFs
The intensifying crisis over Boeing’s previously revered 737 Max 8 jet has reverberated across the globe in the past few days. Severe concerns surfaced after a second fatal 737 Max 8 crash in less than six months occurred in Ethiopia over the weekend. Clearly, these tragedies have been absolutely devastating for all involved. In response, several airlines and even countries, including China, Indonesia, and Singapore, have grounded all 737 Max 8 aircraft.
Boeing Stock Gaps Down
The negative effect on Boeing’s business has also been made abundantly clear. After reaching a record high of 446.01 only at the beginning of March, shares of Boeing (BA) gapped down sharply little more than a week later as investors dumped the stock on Monday.
Some of those losses were pared by Monday’s close. But Tuesday saw a fresh bout of selling as the full implications of Boeing’s disastrous crisis came into clearer view. By the market close on Tuesday, the stock had lost nearly 16% from its high on March 1st. As shown on the chart, this selling was accompanied by a massive spike in volume. The spike was several times higher than the stock’s average trading volume. In the process, Boeing’s stock has dropped to approach its key 200-day moving average to the downside.
Boeing Decline Weighs on Dow, ETFs
Boeing’s sharp losses weighed more heavily than would be expected on the Dow Jones Industrial Average. This is due to the Dow’s price-weighted calculation. Since Boeing is a relatively pricey stock, it accounts for more than its fair share of the index. When Boeing moves, the Dow tends to move with it.
Similarly, several key ETFs have Boeing as their largest single holding. This includes the Dow-tracking ETF, DIA, of which Boeing currently accounts for more than 10%. And the stock accounts for even more of the iShares U.S. Aerospace & Defense ETF (ITA) at more than 12%. Finally, even the Industrial Select Sector SPDR Fund (XLI) has Boeing as its top holding at more than 9%.
As of Tuesday, all three of these ETFs have continued to be weighed down by Boeing’s decline, despite an overall rising market.
IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Past performance is not indicative of future results. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.
Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don