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Stock Market News: Boeing Hits More Turbulence; Infineon Makes a Big Buy

By Dan Caplinger – Jun 3, 2019 at 11:31AM

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Markets were mixed on Monday morning.

The stock market opened to a mixed reception on Monday morning, as investors struggled to balance challenges related to trade and a global economic slowdown against relatively strong conditions within the U.S. As of 11:15 a.m. EDT, the Dow Jones Industrial Average (^DJI) was up 46 points to 24,861. The S&P 500 (^GSPC 1.42%) gained 3 points to 2,756, but the Nasdaq Composite (^IXIC) dropped 38 points to 7,416.

It's always tough to bounce back from a huge setback, but sometimes, new problems arise that can make things even more difficult. That's what Boeing (BA 1.47%) has gone through lately, as a new issue surfaced over the weekend that's likely to add to criticism of the aerospace giant. Meanwhile, Germany's Infineon Technologies is offering up $10 billion to acquire Cypress Semiconductor (CY), with the deal potentially creating the largest supplier of chips to the automotive industry.

Problems to the MAX -- and beyond

Shares of Boeing sank almost 2% as investors came back from the weekend to discover a new set of troubles plaguing the aircraft manufacturer's 737 model line. On Sunday, Boeing said that it discovered some possible problems in a part that goes onto the wings of various 737 aircraft. Known as "slat tracks," the part helps adapt the aerodynamic qualities of the wing to different needs at various stages of flight.

Large hangar with three Boeing aircraft and various exhibits.

Image source: Boeing.

On one hand, fixing this issue should be relatively simple. Boeing already has replacement parts prepared for its aircraft owners, and it anticipates that replacement work should take only one or two days.

However, the problem goes beyond the 737 MAX aircraft lines that have already been grounded. Boeing identified 21 of its 737NG Next Generation aircraft that are most likely to have the nonconforming parts, and it is advising airlines to check an additional 112 NG airplanes as well. That's on top of 20 MAX aircraft likely to have problematic slat tracks and 159 additional aircraft that Boeing will ask operators to check before they're returned to service.

For Boeing, the news comes at the worst possible time, as airlines and passengers are already responding negatively to safety concerns raised by the two recent crashes of 737 MAX aircraft. Until Boeing can restore its reputation, even minor problems like these will get a lot of attention.

Infineon makes its play for Cypress

Meanwhile, shares of Infineon Technologies fell 9% in trading on Germany's main stock exchange after the Munich-based tech company agreed to acquire Cypress Semiconductor in a deal that puts an enterprise value of 9 billion euros on Cypress. Under the terms of the deal, shareholders will receive $23.85 per share in cash, and that helped send Cypress stock soaring by nearly 25% Monday morning.

The move came quickly following reports that Cypress was looking seriously at putting itself up for sale. Even though the semiconductor industry has seen some tough times lately, Cypress has exposure to key growth areas like autonomous vehicles and the Internet of Things that many investors believed would make it an attractive purchase.

That appears to have been the case for Infineon. Reinhard Ploss, Infineon's CEO, characterized the acquisition as "a landmark step in Infineon's strategic development" and said that the move "will open up additional growth potential in the automotive, industrial, and Internet of Things sectors." Cypress CEO Hassane El-Khoury was also optimistic about the acquisition, believing that it will help the two companies "capitalize on the multi-billion dollar opportunities from the massive rise in connectivity and computing requirements of the next technology waves."

Despite the big move higher, Cypress shares nevertheless traded almost 7% below the offering price. That suggests some concerns about whether the deal will go through as planned, but for now, most shareholders seem to be celebrating the news.

Dan Caplinger owns shares of Boeing. The Motley Fool recommends Cypress Semiconductor. The Motley Fool has a disclosure policy.

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