Boeing a Drag on Dow as Blue Chip Average Nears All-Time High

Boeing is the most heavily weighted stock on the price-weighted Dow, and that is preventing the average from moving neck-and-neck with the S&P 500 toward all-time highs.
James Hyerczyk
Boeing Manufacturing Facility and Logo
Boeing Manufacturing Facility and Logo

The benchmark S&P 500 Index and blue-chip Dow Jones Industrial Average closed higher on Monday, boosted by optimism over U.S.-China trade relations as well as positive expectations for the earnings season.

Additionally, the S&P 500 rose 0.7% to 3006.72, notching its first close above 3000 since September 18. The Dow advanced 57.44 points, or 0.2% to 26827.64.

Furthermore, the S&P 500 could hit the all-time high set in July this week. The broad-based index is just 0.7% from reaching 3027.98, the record from July 26.

Meanwhile, the Dow is nearing its all-time high also set in July. It is 2.10% from hitting 27398.68, the record high from July 16.

What is Slowing the Dow?

So why is the Dow lagging the S&P 500 Index? The answer is Boeing. Although Boeing is a component of the S&P 500 Index, it is one of 500 stocks. In the Dow, it is one of 30 stocks.

In the S&P 500 Index, Boeing is weighted 0.742134%. In the Dow, Boeing is weighted 8.706019. Furthermore, because the Dow is price weighted, the stock’s with the highest price get the biggest positions in the benchmark, and no components in the Dow are even close to Boeing’s $300-plus price tag. Additionally, Boeing is the 30-largest stock in the S&P 500 and not part of the NASDAQ.

The Dow Jones Industrial Average would be a lot higher if Boeing wasn’t dragging it down. Recently a 4% drop in shares of Boeing, translated into a nearly 13 point drag on the Dow. Just three-days ago, a 6.8% drop in Boeing, shaved more than 25 points off the index.

Boeing is the most heavily weighted stock on the price-weighted Dow, and that is preventing the average from moving neck-and-neck with the S&P 500 toward all-time highs.

What’s Wrong with Boeing?

It’s a troubled company. Earlier in the year, the aircraft maker was ordered to ground its entire fleet of 737 Max in March after two of the jets crashed, killing 346 people. Last Friday, the FAA and the U.S. Department of Transportation said they were investigating whether Boeing withheld information during the certification process of its bestselling 737 Max.

Why is This Important Now?

We’re talking about Boeing today because it is due to report earnings on Wednesday morning before the New York market open.

It’s been in the news so investors will be watching the earnings report. Buyers could come in big if the report comes in better than expected, especially when combined with the hope of a U.S.-China trade deal. This could drive the Dow sharply higher.

On the other hand, negative news from Boeing could help offset good news about the trade deal or other strong earnings data. The S&P 500 Index and the NASDAQ Composite could hit new all-time highs, while the Dow struggles.

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