- 33,000 Boeing workers walked off the job on Friday.
- Workers are demanding a 40 percent pay augment over four years.
- Wall Street is up after Bill Dudley announced a 50 basis point cut.
- Inflation forecasts fell to eight-month low.
The market reached euphoria on Friday, but Boeing (BA) is the Dow Jones stock most missed in the rally. A major strike, the first in a decade and a half, brought further uncertainty to the airline company, which has been plagued by a series of internal problems.
This Dow Jones Industrial Average (DJIA) gained 0.9% on Friday, outperforming other indexes, as Wall Street hopes for a 50 basis point interest rate cut by the Federal Reserve (Fed) at its September 18 meeting next week. It was helped on Thursday by slow Producer Price Index (PPI) data. Boeing shares were down 3.4% at the time of writing.
Boeing Stock News
About 96% of Boeing union members voted to strike Thursday night. Boeing has 33,000 members of the International Association of Machinists & Aerospace Workers (IAM), and the union needs a two-thirds vote to strike.
The difference between the union and Boeing management is primarily the offer of a 25% salary augment, to be implemented over four years. The union and the huge majority of employees are demanding a 40% augment.
The outage, the first since 2008, will affect production of the 737 MAX planes and could cost the company as much as $1.5 billion if it lasts 30 days, CNBC reported.
The strike follows years of unrest at the largest U.S. exporter. Boeing has faced lawsuits and government investigations since 2018 following the crashes of passenger planes in Ethiopia and Indonesia.
Security concerns and the murder of an engineering whistleblower have also cast a shadow over the company’s prospects. Shares have fallen 40% this year and 58% over the past five years.
Wall Street increasingly excited about 50 basis point gain
The odds of a 50-basis-point rate cut next Wednesday rose from 28% to 43% on Friday, according to data from CME Group’s FedWatch Tool. A number of factors emerged overnight to support that.
Inflation expectations for the coming year fell for the fourth month in a row to 2.7%, the lowest level since December 2020, according to the University of Michigan Consumer Sentiment Index released Friday.
Additionally, a Labor Department report on Friday showed that import prices fell the most in eight months in August.
Articles in the Financial Times and The Wall Street Journal point out that while the headline expectation at Wednesday’s Federal Open Market Committee (FOMC) meeting is a 25 basis point augment, that is actually a fluke, based on conversations with people familiar with the situation.
Former New York Fed President Bill Dudley, who is likely aware of the ongoing internal FOMC talks, has stressed the “strong case” for a deeper cut. Goldman Sachs has also openly talked about the need for a 50 basis point cut over the past week.
Boeing stock chart
Looking at the monthly chart, Boeing’s problems are really starting to show. The best we can hope for is a hold of the $120 level. This level supported price action in 2020 and 2022.
BA Monthly Stock Chart
