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Retail Sales Improve, Boeing (BA) Weighs on Dow


Monday, March 11, 2019

Pre-market futures on the Nasdaq and S&P 500 this morning are up slightly to start a new week, though the Dow is expected to open 150 points below its Friday close. The reason, at least initially, is that heavily weighted component The Boeing Company BA has taken an 11% sell-off as of this hour, following the second crash of its 737 MAX in the past 6 months.

Over the weekend, all 157 people died aboard a Boeing 737 MAX plane that crashed in Addis Ababa, Ethiopia. This tragedy was chillingly familiar to a similar type crash in Indonesia last October, when 189 people perished. Following the Indonesian crash, there were no augmentations in Boeing’s 10-K filing relating to the Boeing 737 MAX model.

Boeing’s 737 is the world’s most successful aircraft in terms of sales. The MAX version was a more recent update that made the planes more fuel efficient. Besides Boeing, airline companies that have recently invested in the plane are all down in today’s pre-market, including Southwest LUV, American AAL and United Continental UAL. In fact, all Chinese, Indonesian and Cayman Islands 737 MAX planes have now been grounded until further notice.

For Boeing’s part, today’s pre-market drop has given back all the 9.3% gains the stock has made since Christmas Eve 2018. The aircraft giant had been helping the Dow reach higher highs thus far in 2019, and shares had carried a Zacks Rank #1 (Strong Buy) as of Friday’s close. We expect analysts to revise estimates in the coming week.

January Retail Sales (Delayed)

A new headline on Retail Sales for the month of January (delayed by the long U.S. government shutdown) outperformed expectations: +0.2% from the +0.1% estimate. This is also much better than December’s downwardly revised -1.6% headline.

Stripping out ex-auto sales, we see this figure rise to +0.9%, ex-autos & gas +1.2%. The control figure was 1.1%, and this is significant because the December control number — that which strips away near-term volatility — was revised down from the original -1.7% to -2.3% in today’s read. This constitutes the worst monthly control number since the year 2000.

Basically, the “wealth effect” — how an individual’s or a household’s investment performance causes them to spend — hit the Retail Sales figures in December hard, as a tumbling stock market dampened consumer sentiment during the holiday shopping season. Now the the market has regained some of its footing (with help from a more dovish stance thus far from the Fed regarding interest rates), we are seeing Retail Sales numbers responding in kind.

Mark Vickery
Senior Editor

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