In recent weeks, we have highlighted how there has been rotation away from the best performing stocks in the first leg of the rally off of the 3/23 low while the stocks that had been the laggards have become the new market must-haves. Boeing (BA) is a prime example of this trend. Heavily connected to the decimated airline industry, BA only rose 15.04% in the first part of the rally from 3/23 to the recent 5/13 low. While not the worst stock in the index during that time, it lagged the Dow Jones Industrial Average which rose over 25%. But along with others in the industrial sector like the airlines, recent performance has been much more impressive with BA up 69.08% from 5/13 through Friday’s close. Today alone the stock is up another 11% after rallying 11.47% on Friday and 12.95% last Wednesday! That leaves it at its highest level since early March.
With such large gains in a little less than a month for a stock with one of the higher stock prices in the index, BA has added roughly 575 points to the price weighted Dow. That has by far been the largest contributor to the Dow since 5/13 accounting for roughly 14.9% of the overall move and nearly double the next biggest contributor, Goldman Sachs (GS), which added 316.32 points to the Dow, or roughly 8.19% of the overall move since 5/13. Other major contributors from the Financials sector like Travelers (TRV), American Express (AXP), and JPMorgan Chase (JPM) are some more examples of the recent rotation into stocks that lagged in the immediate wake of the bear market. Click here to view Bespoke’s premium membership options for our best research available.
Turnaround Tuesday has carried into hump day with the Dow up well over 5% again today as of this writing. As we mentioned in an earlier post, that means the Dow is on track for its first back-to-back up days for the first time since early February. Remarkably, even with only two consecutive up days, the index is closing in on exiting a bear market. For that to happen, the Dow would need to close above the 22,310.32 level which is 20% off of the bear market closing low (Monday’s close at 18,591.93). At today’s high, the Dow was less than 300 points or 1.32% from that level.
As for the individual stocks contributing to the rally, Boeing (BA) deserves a lot of thanks. The stock has been hit very hard during the sell-off. Whereas the stock has traded in the mid-$300 for much of the past two years and up to mid-February, as of late last week BA had fallen below $100. That massive drop in price means that day to day movements in the stock would have a lesser impact on the level of the price-weighted Dow. In spite of this, BA has contributed over 400 points to the Dow’s rally in the past two days alone! That is much more than any other stock in the index with the next biggest contributor being UnitedHealth (UNH) who’s 335.44 point contribution comes as its share price is currently around $100 more than BA. BA’s contribution is also almost 200 points more than those of McDonald’s (MCD), Visa (V), and Apple (AAPL). Of all 30 Dow stocks, there is only one that is down over the past couple of days, subtracting from the index’s rally: Walmart (WMT). Given WMT has held up fairly well recently, its performance is yet another example of investors’ focus on the more beaten down names that we have noted earlier today and in last night’s Closer. Start a two-week free trial to Bespoke Institutional to access Closer and full range of research and interactive tools.
Yesterday, we showed a table of how much each component of the DJIA has impacted the index since its peak on 2/12. Given the continued decline in the market today, we wanted to provide an update showing the stocks with the largest negative impact on the index over the last month. Of the roughly 7,700 points that the DJIA has dropped over the last month, Boeing’s 53% has accounted for more than 1,250 of those points. Cut in half in just a month! Boeing was close to a $200 billion company in February, and now it’s less than $100 billion!
The decline in Boeing (BA) over the last two days is literally unlike anything the stock has ever seen before. The chart below shows the rolling two-day performance for BA going all the way back to 1962. If this morning’s levels remain in place (and prices have been moving wildly), it will be the largest two-day decline (-29.7%) for the stock on record. While the stock saw declines of over 20% in 1998 and after 9/11, those declines were nowhere close to what we are seeing today. Looking to make some sort of sense of all these crazy market moves? Start a two-week free trial to Bespoke Institutional for full access to all of our research and tools.
It’s been a tumultuous month for the Dow Jones Industrial Average since its closing high on February 12th as the index has declined over 5,500 points or 18.8%. Below we have provided a breakdown of which stocks have had the largest and smallest impact on the decline. For each stock listed below, we have included its performance since the close on 2/12 in both percentage and price terms. The reason, of course, for including price changes is because the index is price-weighted. Therefore, a stock with a low share price but a large percentage decline may not have as large an impact on a stock with a larger share price but a smaller percentage decline. Because of this, the table is sorted by stocks with the largest weighting in the index (highest share price) at the top.
Remember the days when Boeing (BA) was the most heavily weighted stock in the DJIA? Well, it was only a month ago! Back on 2/12 when the DJIA last peaked, BA was the most heavily weighted stock. But after a decline of nearly 40% since then, it’s now the fourth most heavily weighted behind UnitedHealth (UNH), Apple (AAPL), and Home Depot (HD). Since 2/12, BA’s decline has accounted for almost 17% of the DJIA’s decline, or more than 900 points! Not only has BA been the largest contributor to the DJIA’s downside, but the next closest drag on the index (Goldman Sachs – GS) has had less than half the impact to the downside. Other relatively large contributors to the downside have been Apple (AAPL), United Technologies (UTX), and JPMorgan Chase (JPM). On the upside, there hasn’t been much. Since the DJIA’s closing high on 2/12, the only stock that is up is Walmart (WMT), but with a gain of 0.1%, its impact on the DJIA’s level has been less than a point. I guess we’ll take what we can get! Start a two-week free trial to Bespoke Institutional to access our full range of research and interactive tools.
For more than a year now, Boeing (BA) has been plagued by the 737 MAX crisis which has weighed on shares of the plane manufacturer with it now currently down nearly 20% from when the initial groundings took place on March 10th of last year. Despite this, while underperforming the broader market due to the 737 issues, the stock is actually still up just over 5% since the start of 2019.
Even though BA has lagged, it is still the highest-priced of the 30 stocks in the price-weighted Dow Jones Industrial Average. Currently trading around $338.50, the only stocks in the index holding a candle to BA are Apple (AAPL) and UnitedHealth (UNH), which also trade north of $300 per share. That means these stocks have the highest weighting in the index and therefore have a much larger impact than other stocks on the Dow’s performance.
With BA’s issues, a number of people have pondered the what-ifs for the Dow had the company not had the issues with the 737. Would we have already broken out the Dow 30K hats were it not for BA? In the chart below, we show the actual performance of the DJIA and have overlaid the performance of an ‘alternate Dow’ showing its performance if BA had not been in the index since the start of 2019. We used the start of 2019 instead of the actual date of the groundings as it is a little less arbitrary. By our calculations, while we would be a bit closer, even if BA wasn’t in the index since the start of 2019, we wouldn’t quite be at Dow 30K yet. As shown, our alternate Dow would be almost 1% or 266 points higher if Boeing was not included in the index since the start of 2019.
While BA has been a drag on the DJIA since last March, it also provided a big boost to the index in early 2018 before the 737 issues hit the stock. In fact, at the start of March 2017, BA was up over 36% YTD and the spread between the Dow’s performance with and without BA was around 700 points in the other direction as it is now!
Another example of this dynamic in which high priced stocks have a greater impact on the index was observed on Tuesday when Apple’s (AAPL) stock fell after the company warned that Q1 revenues would be shy of prior guidance due to the coronavirus. The warnings sent shares down over 3% at its intraday lows, but the stock only finished down 1.83%. While there were equivalent or larger declines like Dow (DOW) or Walgreens Boots Alliance (WBA) in Tuesday’s session, AAPL’s declines by far weighed on the index more than any other stock. Of the Dow’s 165.89 point decline, AAPL contributed 40.35 points. Fortunately, UNH helped to mitigate some of those losses as it had a positive impact on the index of +22.79 points. Start a two-week free trial to Bespoke Institutional to access our Closer, full list of interactive tools, and much more.