Monday morning was a downer for stock market watchers, as major benchmarks lost ground following what for many traders was a long four-day weekend. Because of recent signs of economic strength, some investors were afraid that the Federal Reserve might not deliver an interest rate cut later this month, dashing the hopes that had powered the market's most recent rally. As of 11:15 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 110 points to 26,812. The S&P 500 (SNPINDEX:^GSPC) dropped 13 points to 2,977, and the Nasdaq Composite (NASDAQINDEX:^IXIC) was lower by 59 points to 8,103.
A couple of stocks in the Dow got considerable attention from investors. Boeing (NYSE:BA) sank due to yet another setback for the aircraft manufacturer, which has had to deal with massive challenges since the two fatal accidents involving its 737 MAX model. Meanwhile, investors are grappling with the factors affecting iPhone maker Apple (NASDAQ:AAPL), and at least one analyst thinks that the mobile device pioneer is destined to disappoint when it reports its latest earnings results toward the end of the month.
A Saudi airline switches gears to Airbus
Shares of Boeing dropped about 1.5% on news over the weekend that the aerospace giant had lost an aircraft order to its biggest rival. Flyadeal, which is a budget carrier that started operating a couple years ago as a sister company to Saudia Airlines, announced that it had chosen not to go through with a provisional order with Boeing, instead switching to make a new order with rival Airbus.
The provisional order, signed last December, involved 30 737 MAX aircraft worth roughly $5.9 billion. However, Flyadeal said that it would instead take delivery of 30 Airbus A320neo aircraft that Saudia had ordered at the Paris Air Show last month. As a result of the move, the odds are good that Flyadeal will end up solely operating A320 aircraft for the foreseeable future.
Boeing accepted that Flyadeal had scheduling requirements that made the grounded 737 MAX no longer a viable option for the airline. Nevertheless, investors are concerned that even though this might be the first dropped contract for Boeing, it might not be the last. Already in the Middle East, other airlines like Oman Air and Flydubai have discussed taking a closer look at Airbus if Boeing can't get the 737 MAX's issues resolved quickly. With plenty of carriers across the globe sharing similar frustrations, this weekend's news serves as a reminder of just how bad things could get for Boeing as long as the MAX remains out of the air.
A bite out of Apple
Shares of Apple (NASDAQ:AAPL) fell more than 2% following negative comments from Wall Street analysts about its near-term future. Rosenblatt Securities cut its rating on the iPhone maker from neutral to sell, citing several challenges facing the tech giant.
Rosenblatt's concerns include the performance of the most recent releases of iPhones, calling out the iPhone XS as a particularly poor seller in comparison to most of Apple's past product launches. Without any major new product releases on the smartphone front expected for the remainder of this year, the company might have to wait until late 2020 for a catalyst from an anticipated release of a 5G-enabled iPhone. Even with the benefit of stock repurchases, Apple's valuation proposition might well erode over the next year.
A lot will hinge on whether Apple can overcome trade-related headwinds. Tension between the U.S. and China is hitting the company's sales in the world's second-largest economy, and China will be a key growth driver over the long run as well. In addition, the worries about the iPhone stress how important it is for Apple to build out its services revenue in order to avoid the volatility that an overreliance on hardware can create in quarterly results.