The Dow Jones Industrial Average (DJINDICES: ^DJI) continues to climb higher, up 0.45% in midafternoon trading. Investors were happy to see that Americans' personal spending rose 0.5% in November from October -- the fastest pace since June. Consumer spending is a key driver of the U.S. economy; it represents two-thirds of demand, giving investors confidence in our economy's strengthening momentum. Consumer spending on durable goods, which are big-ticket items that last longer than three years, was even stronger -- climbing 1.9% in November. That bodes well for Boeing (NYSE: BA), one of the Dow's highest-weighted components.
Boeing's had an excellent year, up 82% in 2013 alone, and the aviation giant continues to make headlines. Boeing's next-generation 777X airplane dominated sales last month at the Dubai Airshow last month, and on Friday the company announced that Cathay Pacific agreed to purchase 21 777-9X airplanes. The order is valued at more than $7 billion and makes the airline the first Asia customer to purchase the airplane. The 777X offers cash-strapped airlines improved payload range while reducing operating costs and will continue to be a big driver of Boeing's growth.
In other Boeing news, unionized machinists will vote on the company's latest proposed contract on Jan. 3. The 777 is manufactured its Everett, Wash., plant, and Boeing will guarantee the facility receives production of the 777X if the workers accept a new proposal that will replace their pension plan with a 401(k)-style savings account. Union members voted 2-1 against an earlier offer in November, but Boeing has made large concessions, including a larger signing bonus, in a new proposal said to "contain significant improvements."
An agreement between Boeing and the union would be a big win for investors, as a large uncertainty would be removed. Failure to reach a deal leaves the possibility of Boeing taking 777X production elsewhere, where it risks a less experienced workforce and thus likely production problems and delays that could weigh down the company's stock.
Outside the Dow Jones, Ford (NYSE: F) is beginning to gear up for next month's North American International Auto Show in Detroit. Ford already unveiled one of its most anticipated vehicles to be launched next year, the 2015 Mustang, but the company is likely to roll out the latest version of its most important and profitable vehicle in Detroit: the 2015 F-150 full-size pickup truck.
"This is already the most significant debut at the auto show," Joe Langley, a production analyst for researcher IHS Automotive, told Bloomberg in an interview. "Everybody's going to be dissecting that thing for a long time, especially since Ford will be taking such a big gamble.
That big gamble is Ford's pledge to take as much as 750 pounds out of its next-generation trucks to help meet fuel-economy regulations. It's a big risk for multiple reasons. One, Ford's marketing team will have to convince loyal truck buyers that replacing steel with a lighter aluminum won't alter the truck's performance or "toughness." Second, moving to aluminum will likely require changes to how Ford assembles the product.
Sales of Ford's F-Series trucks are up nearly 20% this year, even as the automaker's main competition has unleashed new designs. Ford will need to make sure the F-150 launch goes as smoothly as possible, and this will be a key factor for investors to watch in 2014. Inventories of older F-Series models must remain at appropriate levels or Ford will be forced to dish out heavy incentives to move those vehicles off dealers' lots -- a move that would hurt Ford's profits immediately. This has been an excellent year for Ford, one of its best in history, and if the Mustang and F-150 launches go smooth next year, 2014 could be better than its lower guidance anticipates.
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