Dow Dives 160 Points as Boeing's Stock Crashes Despite Stellar Earnings

Investors grow jitters all across the market today, but smart long-term investors shouldn't panic at the market's slide.

Jan 29, 2014 at 2:30PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Investors' brief burst of optimism yesterday didn't last long, as the markets have resumed the downward trajectory that has marked much of January. The Dow Jones Industrial Average (DJINDICES:^DJI) is down more than 154 points as of 2:30 p.m. EST, with most blue-chip stocks in the red. Earnings season has taken its toll again, this time on 2013's big Dow winner, Boeing (NYSE:BA), which has seen its stock hammered by more than 6% today. Let's catch up on what you need to know.

Irrationality dominates on a down Wednesday
As has been the case in the recent past, more Federal Reserve action has spooked investors over stimulus tapering. The Fed announced at 2 p.m. that it will cut monthly bond-buying by another $10 billion, down to $65 billion a month. While much has been made around the market airwaves about the taper, the reality is that stimulus has to wind down one way or another. There's no need to take an ax to your long-term investment strategy just because of the market's irrational fright over central bank activity.

Boeing's offers another example of irrational investor behavior today. The stock has plunged despite the company reporting a strong performance in the fourth quarter. The aerospace giant announced that core earnings climbed 29% year over year to $1.88 per share. Meanwhile, revenue jumped more than 6% to $23.8 billion. Both figures represented beats over analyst expectations. Boeing announced increased production rates, along with record delivery numbers on some of its top aircraft, including the 737 and 777 airliners.

So why the horrible day on the markets? Investors rang the alarm over Boeing's projections of core earnings to fall between $7 and $7.20 per share for the full year in 2014, a sizable amount below the average analyst estimate of $7.46 as surveyed by Bloomberg. With Pentagon budget cuts also in full swing, Boeing's defense group could see a tough time finding much growth in the new year.

But does this really deserve a more than 6% drop on the day on light of Boeing's stellar performance? Last year Boeing projected full-year earnings guidance on the conservative side and ended up beating it handily, and given how strongly the commercial aerospace market's risen recently, there's no reason to expect Boeing's largest division to slow down anytime soon. The global economy's rebound should only fuel an increase in commercial airline traffic, and that combined with growing demand for aircraft in China plays right into Boeing's hands. Don't make much out of today's big sell-off besides jittery investors finding a reason to take their profits from Boeing's big run-up over the past year.

Your financial future can't wait for the market's moves
Boeing's boomed over the past year to make the most of the market's rally, but millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Dan Carroll has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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