Please ensure Javascript is enabled for purposes of website accessibility

Dow Jones News: IBM Rally Hits a Wall; Boeing's Starliner Suffered From Software Bug

By Timothy Green – Updated Feb 7, 2020 at 12:42PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

IBM's management shuffle lit a fire under the stock, but the rally faded on Friday. Boeing stock was also down as a new software bug was revealed.

After staging a powerful rally through the first four days of the week, the Dow Jones Industrial Average (^DJI 1.88%) ran out of steam on Friday. The Dow was down 0.69% at 1:05 p.m. EST, even after better-than-expected job growth was reported for January.

Slumping along with the Dow were International Business Machines (IBM 0.84%) and Boeing (BA 4.65%). IBM stock had been surging after the company announced a CEO transition, but it was unable to keep the rally going. Meanwhile, Boeing stock was weak after a new software bug related to its Starliner spacecraft was disclosed.

IBM's rally takes a breather

Shares of IBM got a big boost at the end of January when the tech giant announced that CEO Virginia Rometty was stepping down effective April 6. The CEO position will go to cloud and cognitive software chief Arvind Krishna, while the president position will go to Red Hat head honcho James Whitehurst.

Between Jan. 31 and Feb. 6, IBM stock shot up 14.6%. The stock carved out a new 52-week high, reaching levels not seen since 2018.

The IBM logo on a building.

Image source: IBM.

Shares of the century-old tech company took a break on Friday, falling along with the Dow. IBM stock was down about 1% by early afternoon, giving back a small portion of its recent gains.

Rometty's legacy at IBM is complicated. Since taking over in 2012, revenue, profits, and the stock price have all moved in the wrong direction. However, the company has refocused over the years on growth opportunities like hybrid cloud computing, artificial intelligence, and data analytics. Legacy businesses were sold off or de-emphasized, with resources shifted to areas where IBM could build up competitive advantages.

IBM expects to produce revenue growth this year, driven by the Red Hat acquisition and a recently launched mainframe system. If the company can remain in growth mode after 2020, the stock could finally regain the ground it's lost since topping out soon after Rometty took over.

The management shuffle reset the narrative. Now, IBM needs deliver.

Boeing seems to have trouble with software

Boeing is still working on fixing the issues with the 737 Max, which was grounded following two fatal crashes. A problem with a software system was behind those two crashes, and more issues have emerged as Boeing races to get the plane back in the air.

Boeing is now having issues with software in other parts of its business. On Thursday, a NASA safety review panel said that a December flight test of a Boeing CST-100 Starliner space taxi almost ended in a catastrophic failure due to a software bug. That test was cut short by a separate issue.

The new software bug was fixed by Boeing during the flight, but the panel found that it could have resulted in a catastrophic failure involving erroneous thruster firings. The panel recommended that NASA review Boeing's software verification process before allowing its spacecraft to ferry humans.

The 737 Max debacle has threatened Boeing's reputation. Yet another software issue won't help the situation. Boeing stock was down 1.25% Friday afternoon.

Timothy Green owns shares of IBM. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

International Business Machines Corporation Stock Quote
International Business Machines Corporation
$122.76 (0.84%) $1.02
The Boeing Company Stock Quote
The Boeing Company
$133.44 (4.65%) $5.93
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,683.74 (1.88%) $548.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.