Stocks were mixed yesterday. The Dow Jones Industrial Average actually ended up dead even for the first time since April 24, 1914.
In a day absent much new news yesterday, three items got my attention. First, the new Disney+ service launched with more than a few technical glitches. I guess that was to be expected. Now it is up to Disney to get those glitches fixed quickly. I expect it will. So does the stock market as Disney’s stock was one of the Dow’s leaders yesterday. Second, Dean Foods filed for bankruptcy yesterday. Dean is the largest producer and seller of milk. Who would think milk would go out of favor? But young kids today eat less cereal and health-searching individuals are using more derivatives from soy and coconuts. Thus, demand has fallen faster than supply. Nothing is sacred in the world of nature.
Third, Boeing lost orders for 200 737 Max jets so far this year. There is a price to pay beyond the direct costs associated with the two plane crashes. That number could rise if further delays on recertification occur. Boeing believes the plane will get recertified in phases as early as next month, and some planes will be allowed to fly as early as January. But most airlines have removed the Max from schedules until March. For Boeing# shareholders, getting the jets back into service by March would be perceived as a victory. While safety always comes first, politics is a big part of this equation. The FAA clearly was too reliant on Boeing data and too lax on oversight prior to the two crashes. This time around, the tendency will be to overshoot in the opposite direction. Any slight variance will be called out and could subject the jets to delay. It isn’t very likely that the planes will be grounded permanently but politics, not engineering or safety, will be the biggest factor determining when the planes will fly again. The longer the delay the more expensive it will be for Boeing. Not only will Boeing face order cancellations, but it will also have to negotiate compensation to airlines that were flying the Max and suffered revenue losses when the planes were grounded. Perversely, airline profits are largely at record highs today because the grounding of the Max limited supply and supported higher prices.
Otherwise, today is going to see a lot of attention focused on Washington. The first public impeachment hearings start today. While the testimony this week will largely mirror the depositions taken behind closed doors and already released, clearly hearing the words directly from the key witnesses will have some impact. A key will be to watch how public opinion shifts, if at all, over the next week or two. If opinion remains split and Republicans close ranks behind President Trump, the odds of conviction by the Senate would decline, perhaps materially, assuming no further new bombshells beyond what has already been disclosed, admittedly a big assumption. I will leave the rest of the political discourse to others.
Markets this morning are weak across the globe, probably more profit taking than anything else. Bonds are opening higher and oil prices are weak. Otherwise most of the chatter is about the cold weather (yes, pun intended).
Today, Jimmy Kimmel is 52. Whoopi Goldberg is 64.
James M. Meyer, CFA 610-260-2220