Please ensure Javascript is enabled for purposes of website accessibility

Dow Jones Jumps 200 Points as Boeing Stock Surges, Big Tech Lags Behind

By Timothy Green – Jun 8, 2020 at 2:07PM

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

Boeing is having another good day as analysts strike an optimistic tone. The same can't be said for big tech stocks.

The Dow Jones Industrial Average (^DJI -1.71%) kicked off the new week with another strong gain. The Dow was up 0.9% at noon EDT Monday as investors continued to be optimistic about the post-lockdown economic recovery. New York City, hard hit by the novel coronavirus, began reopening on Monday after close to three months under a stay-at-home order.

After a strong week, Boeing (BA -3.39%) stock continued to lead the way on Monday thanks to positive analyst commentary. While Boeing was up big, the biggest tech stocks found in the Dow -- Apple (AAPL -3.00%), Microsoft (MSFT -1.94%), and Intel (INTC -2.31%) -- failed to keep up.

Boeing stock soars again

Shares of airplane manufacturer Boeing shot up about 40% last week, driven in part by optimism about the economy recovering. While demand for air travel remains deeply depressed, a quicker-than-expected recovery could be in the cards. Last Thursday, American Airlines said that rising demand had led it to increase domestic flights scheduled for the summer.

A plane flying with clouds behind it.

Image source: Getty Images.

There at a lot of unknowns at this point. How much of this is pent-up demand that may wane in the months ahead? If confirmed cases of the novel coronavirus surge again in the U.S., a possibility after nearly two weeks of protests in many cities, how will demand be affected? If passenger demand stabilizes at a significantly lower level than before the pandemic, will the most financially fragile airlines be able to survive?

None of these concerns mattered on Monday for Boeing stock. Shares were up about 11.8% by early afternoon, driven by some positive analyst commentary. Seaport Global initiated coverage on the stock with a buy rating and a price target of $277, while Goldman Sachs maintained its buy rating and boosted its price target from $209 to $238. Goldman cited "second derivative improvements" in air travel, meaning that not only is demand increasing, but the rate of that demand increase is speeding up.

While the recent rally has been powerful, shares of Boeing remain down around 41% from their 52-week high. The stock still has a long way to go before making pre-pandemic investors whole.

Big tech can't keep pace

While the broader market rallied on Monday, shares of the Dow's big technology companies were largely lower by early afternoon. Apple stock was down about 0.3%; Microsoft stock was down about 0.5%; and Intel stock was down roughly 1.7%.

All three tech stocks are up since the start of the year, and all three have rebounded sharply since bottoming out in March. These rallies have occurred despite significant risks facing these companies.

AAPL Chart

Data by YCharts.

The iPhone is still by far the most important product for Apple, and the 5G iPhones expected to launch later this year would have had a chance of driving a significant upgrade cycle in normal times. But how the iPhone business will fare in a severe recession is unclear. The iPhone was a fairly new product during the financial crisis, and Apple has grown immensely since then. The company may not be all that recession-proof.

Microsoft faces less risk, as many of its software products are mission-critical and unlikely to be dumped during tough economic times. But layoffs and bankruptcies among its customers could sting, and it's hard to say how durable the recent surge in cloud computing demand really is. Like the iPhone, the cloud computing infrastructure business hasn't yet been tested by a severe recession.

Intel has benefited from surging demand for its server chips, but the company is facing intense competition from rival Advanced Micro Devices on all fronts. AMD's PC chips are competitive, even in laptops where the company has traditionally struggled, and its server chips have forced Intel to cut prices.

Big tech stocks have led the rally over the past few months, perhaps because they were viewed as safe. But that safety will be put to the test as the economy tries to find its footing.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Microsoft. The Motley Fool recommends Intel and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. 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

Apple Inc. Stock Quote
Apple Inc.
AAPL
$138.20 (-3.00%) $-4.28
The Boeing Company Stock Quote
The Boeing Company
BA
$121.08 (-3.39%) $-4.25
Intel Corporation Stock Quote
Intel Corporation
INTC
$25.77 (-2.31%) $0.61
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$232.90 (-1.94%) $-4.60
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$28,725.51 (-1.71%) $-500.10

*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
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

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.