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 (NYSE: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 (NYSE:LUV) , American (NASDAQ:AAL) and United Continental (NASDAQ: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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