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Why Boeing Stock Is Slumping 5%

By Rich Smith – Nov 19, 2018 at 2:47PM

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Could faulty sensors have contributed to the Lion Air Flight 610 crash?

What happened

Across the board and around the world, stock markets are tumbling today -- and for the most part, no one seems to know quite why. (One pundit, for example, attributed the sell-off in tech and internet stocks this morning to a drop in "homebuilder confidence." Huh?!)

In at least one instance, however, we may be able to point a finger at the reason for a sell-off: today's 5.4% decline (as of 2:15 p.m. EST) in Boeing (BA -1.73%) stock.

Boeing 737 MAX 8 in flight.

Image source: Boeing.

So what

Last week, news began filtering out regarding certain "antistall" features built into the maneuvering characteristics augmentation system (MCAS) on Boeing's 737 MAX 8 -- the plane type involved in the Oct. 29 crash of Lion Air Flight 610 -- which may (or may not) have contributed to the crash. Then on Friday, The Wall Street Journal reported that Southwest found it necessary to remove "two malfunctioning flight-control sensors of the same type that has been publicly implicated in the crash" on its own 737 MAX 8 planes "as a precautionary measure."

Now what

While it's still early to say whether the sensors or the MCAS were in fact the cause of last month's Lion Air crash -- or even whether Boeing would bear any liability if they were -- this does appear to be the direction in which investigators are going right now, and that does pose a risk to Boeing stock.

Investors may be hedging their bets today and using the broad market sell-off as an excuse to exit their positions in Boeing in particular rather than take the risk that when this investigation wraps up, Boeing will bear any part of the blame for the Lion Air disaster.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Boeing Stock Quote
$175.78 (-1.73%) $-3.10

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