Boeing Co.'s stock plunge has significant implications for the overall performance of the Dow Jones Industrial Average. While it is one of several factors contributing to the index's decline, it is a major one.
Boeing's stock (BA) experienced a significant drop of 7.9% during premarket trading on Monday. This decline occurred after the grounding of the company's 737-9 Max planes due to an incident involving Alaska Air Group Inc.'s (ALK) aircraft, where a panel blew out.
As a result, Boeing's stock is projected to open at a six-week low, preparing for its most substantial one-day performance decline since October 26, 2022, when it announced disappointing earnings that fell short of analysts' expectations.
Also read: Alaska Airlines and United ground their Boeing 737 Max 9 jetliners after in-flight blowout.
The anticipated decline in price prior to the market opening would subtract approximately 129 points from the Dow Jones Industrial Average (DJIA). Currently, Dow futures (YM00) are down 164 points, representing a 0.4% decrease, while futures for the S&P 500 index (ES00) slipped by 0.1%, and futures for the Nasdaq 100 (NQ00) experienced less than a 0.1% decline.
It is worth noting that the Dow Jones Industrial Average is calculated using a price-weighted methodology. This means that stocks with higher prices have a more significant impact on the overall index value compared to lower-priced stocks. On the other hand, the S&P 500 and Nasdaq indexes follow a market capitalization-weighted approach, giving more influence to companies with higher market values.
This recent development in Boeing's stock performance highlights the potential repercussions for the broader market, indicating an underperformance in comparison to other major market indicators.
Boeing's Stock Influence
Boeing's stock, with a closing price of $249.00 on Friday, holds the 10th spot in terms of influence among the Dow's 30 components. Leading the pack is UnitedHealth Group Inc.'s stock (UNH), which closed at $537.38 on Friday. On the other hand, Walgreens Boots Alliance Inc.'s stock (WBA) wields the least influence and closed at $25.01.
With a market capitalization of approximately $150.6 billion as of Friday's close, Boeing's stock ranks as the 52nd highest-valued stock in the S&P 500.
Impact on Dow Index
Each $1 movement in any Dow stock leads to a shift of nearly 7 points in the index. However, a 1% movement in UnitedHealth's stock would result in a shift of over 35 points in the Dow. In contrast, a 1% movement in Walgreens' stock would have an effect of less than 2 points. Notably, a 1% change in Boeing's stock would move the Dow by slightly more than 16 points.
Alaska Air's Influence on Dow Jones Transportation Average
Alaska Air's stock is a constituent of the Dow Jones Transportation Average (DJT), which, similar to the Dow industrials, is price-weighted but uses a different calculation. The premarket trading shows Alaska Air's stock down by 4.7%, suggesting an anticipated reduction of approximately 11 points in the Dow transports' price.
Spirit AeroSystems Holdings Inc.
While shares of Spirit AeroSystems Holdings Inc. (SPR) experienced an 18.1% decline in the premarket, it is important to note that this stock is not included as a component of the Dow or the S&P 500.
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