Major benchmarks opened with solid gains on Wednesday morning, bouncing back from losses in Tuesday's session. Although there's still considerable uncertainty in trade negotiations between the U.S. and China, Chinese officials seemed to acknowledge that there might be a way to reach partial resolution of the disputes between the two nations. That was good news, coming as it did after a White House move expanded the list of prohibited Chinese companies with which their U.S. counterparts can't do business. By 11 a.m. EDT, the Dow Jones Industrial Average (^DJI +0.83%) was up 149 points to 26,313. The S&P 500 (^GSPC +1.01%) rose 21 points to 2,915, and the Nasdaq Composite (^IXIC +1.22%) gained 61 points to 7,885.
Once again, the 737 MAX aircraft was in the news, this time as American Airlines Group (AAL +1.89%) modified its schedules to account for the continued grounding of the plane. Meanwhile, Green Organic Dutchman (TGODF +0.00%) saw a big decline after it gave its latest update on its prospects for getting financing.
American Airlines gives up on the 737 MAX for 2019
Shares of American Airlines Group were higher by nearly 3% after the airline giant decided to pull more of its scheduled flights with 737 MAX aircraft. The company had previously hoped that the MAX would be available as soon as early December, but recent events prompted American to extend its cancellations through Jan. 15.
Image source: American Airlines Group.
The impact on passengers won't be as big as that might imply, though. American is automatically switching the service on scheduled flights to 737-800 aircraft for all flights through Jan. 6 and for most flights after that. Even so, the disruptions are troubling, especially as the airline industry moves into the key holiday season.
Financially, American is feeling the pinch from the cancellations. The airline said that the MAX grounding cost it about $140 million in pre-tax income in the third quarter.
Even once the MAX comes back online, investors shouldn't expect American to get full capacity from the model immediately. In its release, the company said it intends to "slowly phase in the MAX for commercial service" with increasing use through the rest of January and February. That means investors will have to plan for ongoing impacts not just in the fourth quarter but in the first quarter of 2020 as well.
Organic Green Dutchman needs more green
Shares of Organic Green Dutchman didn't fare as well, falling 14%. The Canadian cultivator of premium cannabis offered an update on credit financing that pointed to big challenges for it to overcome.
Green Organic Dutchman said that it had originally looked at traditional commercial bank loan facilities and equipment leasing arrangements as part of its construction efforts on facilities in Ontario and Quebec. However, the marijuana company encountered a difficult market environment that made the terms on such financing unacceptable. As a result, the cannabis grower has gone back to the market seeking other financing sources.
Green Organic Dutchman's Ancaster facility in Ontario is nearing completion and has already gone through some key regulatory steps, including grow-room certification from Health Canada. The Valleyfield facility in Quebec has a lot further to go, but investors have high hopes for the project, as it will be the world's largest organic cannabis facility when complete.
Marijuana stocks generally have run into resistance lately as investors realize that even with lucrative markets, companies still have to execute well. Financing will be a key ingredient of future growth, and if money dries up for the entire industry, it could prove problematic not just for Organic Green Dutchman but for other well-known players as well.
