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Stock Market News: Southwest Sinks on Boeing Fears; MercadoLibre Gets a (Pay)Pal

By Dan Caplinger – Updated Apr 12, 2019 at 6:12PM

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Find out what moved the market on Tuesday morning.

Tuesday showed an ongoing tug of war on Wall Street, as company-specific news had different influences on various stock market benchmarks. As of just after 11:30 a.m. EDT, the Dow Jones Industrial Average (^DJI -0.54%) was down 89 points to 25,561. However, other indexes were higher, with the S&P 500 (^GSPC -0.16%) climbing 8 points to 2,792 and the Nasdaq Composite (^IXIC -0.04%) picking up 20 points to 7,589.

The crash of a Boeing (BA 2.35%) 737 MAX 8 aircraft in Ethiopia continues to have a downward influence on the market, and the shockwaves are spilling into related areas as well, as Southwest Airlines (LUV -0.80%) experienced some fallout from the incident. On a more positive note, MercadoLibre (MELI -1.24%) found itself the object of interest from payment specialist PayPal (PYPL -0.50%), with an investment that could pave the way toward a deeper collaboration across the Western Hemisphere.

Southwest defends the MAX 8

Shares of Southwest Airlines fell 2% as the Ethiopian Airlines disaster provoked responses from regulatory authorities across the globe. A host of national governments chose to ground or suspend operations of the new 737 MAX 8 in the wake of the crash, including the U.K., China, Indonesia, Australia, and Singapore. Although officials in the U.S. and Canada haven't matched the actions from their international peers, pressure to do so is still increasing as the groundings gain momentum.

Aircraft with Southwest logo on an airport ramp in a desert climate.

Image source: Southwest Airlines.

So far, Southwest has defended the continued use of its fleet of 34 MAX 8 aircraft, saying in a statement that the airline "remains confident in the safety of our fleet of more than 750 Boeing aircraft." Southwest said that it has operated more than 30,000 flights using the MAX 8, with full plans to keep using them going forward.

Southwest's business model has concentrated on Boeing's 737 model throughout its history, reaping the cost savings of being able to specialize in maintaining a single type of aircraft rather than having to jump through hoops in keeping up with maintenance and repair needs for multiple models. However, the recent crash highlights the dangers of failing to diversify its fleet. Southwest has hundreds of aircraft other than MAX 8 models, so even a forced grounding wouldn't crush the airline. However, with load factors remaining at high levels, losing even a few dozen planes would create serious logistical problems for Southwest to overcome.

Check out the latest earnings call transcript for Southwest Airlines and MercadoLibre.

MercadoLibre gets an offer it can't refuse

Shares of MercadoLibre were little-changed on Tuesday morning despite the news that the Latin American e-commerce giant will get substantial investments from some key players in its industry. PayPal said that it will invest $750 million, providing a key portion of the $1.75 billion in capital that MercadoLibre is raising through a stock offering. In addition, U.S.-based hedge fund Dragoneer Investment Group is putting $100 million into the company through a preferred stock purchase.

For MercadoLibre, the purpose of raising capital is growth. As CEO Marcos Galperin noted, the money will help the company speed up its growth, and he's particularly pleased to accelerate "our leadership in e-commece and payments and foster financial inclusion in Latin America as a result of our alliance with a global leader in the industry such as PayPal."

For PayPal, the motivations are equally collaborative. CEO Dan Schulman said, "We've been impressed with the digital commerce and payments ecosystem Marcos and his team have built." Schulman thinks that having PayPal integrate capabilities with the MercadoPago payment system should "create unique and valuable payment experiences for our combined 500 million customers throughout the region and around the world."

Scale has become a key factor in the fast-growing digital payments industry, and the growth of MercadoLibre's payment business has been just as impressive as PayPal's was when it was still part of eBay. It'll be interesting to see if MercadoPago ends up as a separately traded business as well -- and whether it eventually forms an even closer relationship with PayPal.

Dan Caplinger owns shares of Boeing. The Motley Fool owns shares of and recommends MercadoLibre, PayPal Holdings, and Southwest Airlines. The Motley Fool recommends EBAY. The Motley Fool has a disclosure policy.

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