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updated: 3/11/2019 8:44 AM

Boeing futures fall after China, Indonesia and Ethiopia ground 737 Max 8

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  • Boeing futures plunged nearly 10 percent overnight in premarket trading after one of its workhorse 737s crashed in Ethiopia, killing all 157 people. The drop-off comes as China, Indonesia and Ethiopia have grounded the Max 8, and carriers in other countries have signaled they may follow suit.

    Boeing futures plunged nearly 10 percent overnight in premarket trading after one of its workhorse 737s crashed in Ethiopia, killing all 157 people. The drop-off comes as China, Indonesia and Ethiopia have grounded the Max 8, and carriers in other countries have signaled they may follow suit.
    Bloomberg photo by David Ryder

 
By Thomas Heath
WP Bloomberg

Boeing futures plunged nearly 10 percent overnight in premarket trading after one of its workhorse 737s crashed in Ethiopia, killing all 157 people. The drop-off comes as China, Indonesia and Ethiopia have grounded the Max 8, and carriers in other countries have signaled they may follow suit.

The expected sell-off was set to hit the Dow Jones industrial average and drive it down triple digits. The Chicago-based U.S. aerospace giant, with more than $100 billion in revenue and 153,000 employees, is one of the most heavily weighted of the Dow's 30 components.

The S&P 500 and the Nasdaq Composite were expected to open on the upside Monday. Europe and Asia markets were also up Monday despite growing concerns over global growth spurred by a disappointing U.S. jobs report on Friday

Boeing has been one of the Dow's biggest success drivers of the 10-year-old bull market. Boeing shares were up more than 30 percent this year coming into Monday's market.

"The near-10 percent decline in weighing heavily on the Dow because the stock has much more to surrender than other Dow components," said Sam Stovall of CFRA Research.

"In a perfect example of benchmark differences, the Dow is being weighted down by the uncertainties over Boeing, while the S & P 500 is being buoyed by tech stocks," Stovall said.

Air carriers around the globe, including China and Indonesia, have grounded the new 737 MAX 8 model over safety concerns following Sunday's accident. The incident comes as the company faces intense scrutiny over another deadly plane crash involving the same 737 Max 8 model.

The markets dropped Friday following a poor jobs report in the U.S. that suggested the robust U.S. economy may be cooling.

The markets are coming off one of their worst weeks of the year. The Dow and the S & P 500 shed 2.2 percent last week. The Nasdaq fell 2.5 percent. All three indexes are up for the year so far.

Sunday's 737 crash is the second crash shortly after takeoff in six months for one of Boeing's most successful aircrafts. In October, Lion Air Flight 610 in a new state-of-the-art Max 8 plunged into the Java Sea shortly after takeoff from Jakarta, Indonesia, killing all 189 passengers and crew members.

The 737 MAX 8 has been an important profit driver for Boeing since it was introduced in 2017. It is critical to Boeing's broader international ambitions as it competes with Airbus, its European rival in the commercial airline business.

Boeing has delivered 354 of the jets globally and has 2,912 on order, according to market estimates maintained by Boyd Group International. The jet that crashed Sunday was one of five 737 MAX 8 planes operated by Ethiopian Airlines, which has 25 more on order.

In the United States, Southwest Airlines and American Airlines have 59 between their two fleets, with 304 on order. Southwest said it has been in touch with Boeing and plans to follow the investigation. It had not made any changes to its operations or inspection protocol as of Sunday, the airline said. American Airlines said it was monitoring the investigation but remained confident in the safety of its aircraft.