While the tech-heavy Nasdaq Composite was slumping hard on Wednesday, the Dow Jones Industrial Average (DJINDICES:^DJI) managed a 1% gain by 12 p.m. EDT. Optimism surrounding the reopening of the U.S. economy appears to be the driving force, although it remains to be seen whether that optimism is warranted.
Shares of Disney (NYSE:DIS) and Boeing (NYSE:BA) contributed to the Dow's rally on Wednesday. Disney put forth plans to reopen some of its parks in July, while Boeing disclosed that it would layoff nearly 7,000 U.S. employees this week in a bid to cut costs.
Disney sets a date for reopening
The pandemic has been a disaster for Disney, which relies on its parks for a significant portion of revenue and profits. Disney closed its U.S. parks in March as the novel coronavirus spread. In Disney's fiscal second quarter, which ended on March 28 and included a couple of weeks of the shutdown, revenue for the parks segment slumped 10%, while operating profit crashed 58%.
There's finally light at the end of the tunnel. Disney is planning a phased reopening of its parks in July, according to a report from the Orlando Sentinel. The Magic Kingdom and Animal Kingdom will begin reopening on July 11 under the plan, with Epcot and Hollywood Studios reopening on July 15.
Things will not be back to normal right away at Disney's parks. Guests and employees will be required to wear masks and submit to temperature checks, and social distancing will be encouraged. The reopening plan for Disney's Florida parks requires approval from Governor Ron DeSantis.
While the imminent reopening of Disney's parks is good news for the company, there are a lot of unknowns. How willing will people be to take flights to Disney's properties? Will Disney be forced to shut down again later this year if a second wave of the virus hits? How will Disney fare if the U.S. economy is in a deep, prolonged recession?
It may take years before attendance fully recovers. A safe, effective vaccine may be required before many people feel safe crowding into Disney's parks. Then again, months of stay-at-home orders could lead people to take risks just to get out of the house. It's hard to say how people will behave in the post-lockdown world.
Disney stock was up about 0.7% early Wednesday afternoon. Shares of the entertainment giant are down about 21% from their 52-week high.
Boeing begins involuntary layoffs
Airplane manufacturer Boeing is under a lot of stress. The 737 Max has been grounded since early 2019, and airlines haven't been taking delivery of the plane. If that wasn't enough, the pandemic has decimated demand for air travel, throwing the airline industry into disarray and prompting weak demand for commercial airplanes across the board. The recovery could take years.
Boeing has tried to avoid involuntary layoffs, using a voluntary layoff program to pare down its workforce. That changes this week. In a note to employees, Boeing CEO Dave Calhoun announced that 6,770 U.S. employees will be hit by the first round of involuntary layoffs..
Boeing recently raised $25 billion by selling new debt, which the company believes is enough to forgo aid from the U.S. government. But given the rate Boeing is burning cash, layoffs and other cost-cutting measures are a necessity. During the first quarter of 2020, Boeing reported a free cash flow loss of $4.7 billion.
How many employees will eventually be laid off by Boeing depends on how long this crisis lasts. If demand for air travel rebounds slowly, Boeing may need to operate at a depressed level of production for years.
Shares of Boeing were up about 0.6% by early Wednesday afternoon. The stock is down more than 60% from its 52-week high.