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Why Boeing Stock Just Dropped 15.5%

By Rich Smith - Mar 17, 2020 at 11:11AM

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Boeing debt is now two rungs away from "junk" status.

What happened

Shares of aerospace giant and certified blue chip stock Boeing (BA 2.79%) are looking more red than blue (or green) today.

Down some 68% already through the first four weeks of this coronavirus crisis, Boeing stock tumbled a further 15.5% through 10:30 a.m. EDT Tuesday.

Collage of an airplane, coronaviruses, and a world map

Boeing's trying to navigate around a coronavirus storm -- and failing. Image source: Getty Images.

So what

Why is Boeing falling? You can't just blame this one on "the stock market" in general. Today's not the worst day this market has ever had -- not by a long shot. To the contrary, as I pen these words, it actually seems the Dow is up a few points.

Instead, Boeing's down on two news items specific to it. First, Barron's reports today that S&P Ratings just downgraded Boeing's credit rating two notches to "BBB" -- letters that don't mean much to most investors, but that tell lenders that Boeing debt is now just a couple points away from being turned into junk bonds.  

Second, though this is related to the first, The Wall Street Journal is reporting that Boeing is in talks with the White House and with legislators in Congress, trying to convince them both to back a bailout for the airplane maker and include it in a package of relief measures being worked up to salvage the American economy.  

Now what

This bailout, if it happens, would appear to be additional to, not merely part of, the $50 billion aid package that airlines are seeking to save their businesses. Combined, this would be a big chunk of change supporting Boeing on both its costs side and its demand side (because those airlines would presumably turn around and hand some of their money over to Boeing to buy planes).

You'd think investors would consider this good news for Boeing stock. Instead, they seem to be interpreting the second news item as simply confirming the implications from the first, the one about the debt downgrade. Today they seem to be thinking, "Boeing sure looks like it's in dire straits right now. Maybe it's time to sell?"

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