Dow futures fell
On March 11, the Dow Jones Industrial Average futures are trading over 170 points lower in the pre-market session. Boeing (BA) shares have fallen nearly 10%. If Boeing’s shares maintain the fall through the regular trading hours, it would mark the highest one-day fall in the last two decades, according to Reuters.
Boeing stock has the highest weight in the index at 11.26%. So far in 2019, the stock has contributed 30% to the Dow’s 9.1% YTD (year-to-date) gain. Excluding Boeing’s contribution, the Dow’s YTD gain would fall to 6.4%.
Boeing stock has been rising since the beginning of 2019 due to growing optimism regarding its increased airplane deliveries, higher free cash flow, and shareholders’ aggressive return policy. So far, the stock has risen 31% in 2019. The stock has outperformed the returns of US indexes and its peers in the industrial space (XLI). General Dynamics (GD), Northrop Grumman (NOC), and Lockheed Martin (LMT) shares have risen 5.7%, 12.7%, and 14.9%, respectively.
Why are Boeing shares falling?
On March 11, Boeing shares fell due to concerns about more scrutiny for its fast-selling 737 Max series planes following the second deadly crash in five months. Boeing’s 737 Max 8 plane, operated by Ethiopian Airlines, crashed on March 10 and killed all of the 157 people on board.
The crash in Ethiopia is the second fatal accident for Boeing’s top-selling jet in five months. The first crash was on October 29 when Lion Air Flight 610 crashed into the Java Sea and killed all of the 189 people on board. Both of the crashes happened just after the aircraft took off.
The recent mishap with Ethiopian Airlines is expected to result in more scrutiny for the 737 Max 8 series planes. Following the Flight 302 crash, many countries including China, Indonesia, and Ethiopia released notices to their local carriers to ground their fleet of Boeing’s 737 Max 8 planes.
The latest crash might lead to lower orders for Boeing’s fast-selling 737 jets. The company has received over 5,000 orders for 737 Max planes. Boeing has delivered 350 planes since it started production in 2017.