Dow struggles to start week under weight of Boeing
Stocks have begun the new week with some mild profit taking following a relatively quiet weekend as investors await more trade news and the upcoming kickoff of the next earnings reporting season. While the declines on the S&P and Nasdaq have been very small, the Dow is faring a bit worse as a pullback in Boeing (BA) weighs on the blue chip index.
ECONOMIC EVENTS: In the U.S., factory orders fell 0.5% in February, which closely tracked estimates. Of note, the durable orders component was not revised from the 1.6% decline reported in the advance report.
TOP NEWS: Shares of Boeing have slid nearly 5% after the company announced after the close on Friday that it was cutting the production rate for its 737 aircraft while the company and its regulators continue working on a fix to the planes that have been involved in two separate crashes in less than six months. Boeing, which said that the recent Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents were caused by a chain of events, with a common chain link being erroneous activation of the aircraft's MCAS function, has decided to temporarily move from a production rate of 52 airplanes per month to 42 airplanes per month starting in mid-April.
Influential JPMorgan analyst Stephen Tusa downgraded General Electric (GE) to Underweight from Neutral and lowered his price target for the shares to $5 from $6, after which the stock has tumbled over 7% at midday. With the stock up 38% year-to-date, many investors are underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of "small positives," according to Tusa, whose upgrade of the stock to Neutral from Underweight in December drew an equal amount of attention.
Wells Fargo (WFC) was urged by Warren Buffett, its largest shareholder, to look outside of Wall Street for its next chief executive officer following the resignation of CEO Tim Sloan. "They probably shouldn't come from JPMorgan (JPM) or Goldman Sachs (GS)," the legendary investor said in an interview published by The Financial Times.
In M&A news, Versum Materials (VSM) announced that it has received a revised takeover proposal from Merck KGaA (MKGAY) of $53 per share that Versum's board judged to be a "superior proposal" to Versum's previously announced merger agreement with Entegris (ENTG). In response, Entegris said it "does not currently intend to propose to revise the terms of the Entegris-Versum merger of equals."
MAJOR MOVERS: Among the noteworthy gainers was Coherus Biosciences (CHRS), which rose 8.5% after it provided preliminary Udenyca net sales guidance for the first quarter.
Also higher was AMC Entertainment (AMC), which gained over 10% after B. Riley FBR analyst Eric Wold upgraded the stock to Buy from Neutral and raised his price target for the shares to $20 from $18.
Among the notable losers was Spirit AeroSystems (SPR), which slid 6% after Canaccord analyst Ken Herbert downgraded the stock to Hold from Buy and lowered his price target to $92 from $100 after Boeing announced that it is lowering 737 production levels to 42 per month starting in mid-April.
Also lower was Roku (ROKU), which fell 5% after Citi analyst Mark May downgraded the stock to Sell from Neutral and lowered his price target for the shares to $50 from $53.
INDEXES: Near midday, the Dow was down 123.30, or 0.47%, to 26,301.69, the Nasdaq was down 11.79, or 0.15%, to 7,926.90, and the S&P 500 was down 5.26, or 0.18%, to 2,887.48.