- Boeing stock dropped more than 2% in trading Wednesday afternoon after President Trump ordered the grounding of the 737 Max aircraft.
- The emergency order follows calls by a number of US lawmakers to ground the plane.
- Watch Boeing trade live.
President Trump ordered the grounding of all 737 Max aircraft in the US Wednesday afternoon. Boeing stock was down more than 2% on the news with the stock trading at its lowest levels since January 29. The muted move in the stock price may be due to expectations that any such grounding would not heavily impact the company. In addition, the stock is down 17% from its 2019 highs.
In a note published March 13, Morgan Stanley predicted the impact of any grounding would likely be modest. “Ultimately, we are of the view that implications are likely to be short-lived covering weeks and months as opposed to quarters and years, pending further clarity on safety and any neccessary fixes,” wrote Morgan Stanley research analyst Rajeev Lalwani in the note.
The move to ban the plane follows calls by a number of US lawmakers to ground the plane on Tuesday, after two crashes of the 737 Max aircraft in the past five months.
Both Sunday’s crash of an Ethiopian Airlines flight, which killed all 157 on board, and the fatal crash in October of a Lion Air flight in Indonesia, involved Boeing’s 737 Max 8 plane.
More than a dozen airlines as well as the governments of China, Indonesia, Australia, and Singapore have grounded the aircraft. Boeing has more than 5,000 orders outstanding for the 737 Max 8 aircraft, which is expected to be a large driver of business in the years ahead.
The continued sell-off in Boeing will have an outsized impact the Dow Jones Industrial Index. Boeing commands a weighting of more than 10% of the Dow Jones Industrial Average. Boeing’s volatility due to the 737 Max crashes has already caused the Dow to underperform the S&P 500 this year.
Boeing had previously driven 30% of the gain in the Dow this year.
The Dow is a price-weighted index, meaning the company with the highest share price has the heaviest weighting. Even with Tuesday’s losses, Boeing’s stock price remained the highest in the index, at $US366.
Unlike the Dow, the S&P 500 is weighted by market cap, meaning the largest company, Microsoft, has the heaviest weighting. By comparison, Boeing commands the 15th-biggest weighting of S&P 500 names.
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