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Boeing's Big Gains Make Dow Vulnerable

Published 03/04/2019, 02:30 PM
Updated 03/04/2019, 02:46 PM
© Reuters.

By Charley Blaine

Investing.com - If you're a follower of the Dow Jones Industrial Average, you have to like the index's 10%-plus gain this year.

But watch the biggest driver of the Dow's run-up, Boeing (NYSE:BA). The aerospace giant closed Friday at $440.62, but was down 2.4% Monday afternoon. The Dow was slumping as well.

As of Friday, Boeing was up 36.6% for the year. The next-closest performer was IBM (NYSE:IBM), up 22%. But there's a difference. Boeing hit nine 52-week highs in the month of February alone. IBM is still trading 14% below its 52-week high.

A break in Boeing makes the Dow vulnerable to a nasty pullback because the Dow is a price-weighted index. The higher the price, the bigger its impact. Boeing's 2.4% decline Monday knocked 72 points out of the Dow -- 21% of the total. The biggest percentage loser, UnitedHealth Group (NYSE:UNH), off more than 4%, cost the Dow 60 points.

In fact, Boeing's gain 2019 gain through Friday represented 30% of the Dow's 11.6% rise. Take Boeing out and the Dow was up only 8.1%.

At current levels, Boeing is looking pricey, according to technical measures.

And analysts surveyed by Investing.com have a price target on the stock of $443.75, barely a blip above Friday's close. Nineteen of 24 analysts surveyed believe the stock will outperform, which it already has in spades this year.

True, Boeing has a lot of good things going for it. It's tops in passenger-aircraft manufacturing. China hasn't targeted Boeing for higher tariffs and demand for air transportation in China is expected to be solid for the next 20 years.

Europe's Airbus Group (PA:AIR) is reeling after orders for its huge A380 jet have nearly disappeared. And Boeing has a huge defense business.

But Boeing's stock price is an issue for Dow watchers. Keep an eye on it.

Latest comments

The problem is not Boeing but UNH...
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