Boeing's big sell-off is causing the Dow to lag the S&P 500
- Boeing's sell-off since the Ethiopian Airlines crash is causing the Dow Jones Industrial Average to underperform the S&P 500.
- The indexes had tracked each other closely all year, but the Dow is now underperforming by about 2%.
- Boeing carries more than 10% of the weight of the Dow, which is weighted by company share prices.
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The sharp sell-off in shares of Boeing has caused the Dow Jones Industrial Average to lag behind the S&P 500 since the March 8 crash of an Ethiopian Airlines flight that was using the airplane manufacturer's 737 Max aircraft.
Sunday's accident was the second crash of a 737 Max aircraft in five months, causing airlines and governments around the world to ground the planes, which command the majority of Boeing's order book.Boeing shares have fallen more than 15% from 2019 peak, shaving off 461 points from the Dow. That has caused the index, which more or less tracked the S&P for the year, to lag by about 2%. Currently, the S&P 500 is up about 12% year-to-date and the Dow is higher by 10%.
The index's outsized loss since March 10 is being driven by Boeing having the heaviest weighting, over 10%, among the Dow's 30 stocks. The Dow is a price-weighted index, meaning the company with the highest share price, Boeing, has the heaviest weighting. Boeing's stock price is the highest in the index and the only one over $350. Previously Boeing had driven outsized gains in the Dow Jones index.
Unlike the Dow, the S&P 500 is weighted by market cap, meaning Microsoft the heaviest weighting. By comparison, Boeing commands the 15th biggest weighting of S&P 500 names.
Despite this week's sell-off, Boeing is still up 17% for the year, driven by strong fundamentals and solid earnings growth based on the planned launch and development of the 777X, Boeing's largest and most-efficient twin-engine plane.
On January 30, Boeing reported strong quarterly results, with annual revenues topping $100 billion for the first time. The company forecast full-year 2019 earnings of between $19.90 and $20.10 a share, well ahead of Wall Street expectations.
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