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Why General Electric Stock Popped 7% Today

By Rich Smith – Jun 16, 2020 at 12:14PM

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Airlines are making the right moves to bring fliers back. Airplane sales, and airplane engine sales, could follow.

What happened

Shares of General Electric (GE -1.24%) stock popped nearly 7% in early trading Tuesday before giving back some of its gains. At 11:40 a.m. Tuesday, GE stock retained a healthy 3.2% gain -- about twice the S&P 500's.

Why?

Closeup photo of an airplane jet engine

Image source: Getty Images.

So what

There are at least a few reasons why GE stock could be on the upswing today -- two macroeconomic, one a bit closer to microeconomic. On the macro front, reports out of England suggest that researchers have successfully deployed a common steroidal anti-inflammatory drug, dexamethasone, to decrease swelling in COVID-19 patients who are having trouble breathing, thus improving survival rates among such patients. What's bad news for the virus is often deemed good news for the stock market -- and for bellwether stocks like GE in particular.  

There's also word out of Washington that President Trump is pushing a $1 trillion infrastructure spending plan to stimulate the economy. Again, more money being pumped into the economy is good for big, economy-driving stocks like GE -- and yet another reason investors are bidding up stocks, and GE stock in particular.  

Finally, we're now hearing from the Airlines for America industry trade organization representing the airline industry that its member airlines, including all the majors, will all be requiring passengers to wear face masks "throughout the COVID-19 public health crisis."  

Now what

Putting this policy in writing and strictly enforcing it is likely to alienate some airline passengers. Still, I suspect that the majority of folks stuck sitting next to strangers in a sealed metal tube for hours on end will welcome the added comfort of knowing their airline is doing what it can to keep them safe from coronavirus during their trip. This is a measure designed to attract more customers back to the airlines...which should in turn generate more revenue for the airlines...which will permit them to buy more airplanes...and could therefore encourage airplane builders to buy more airplane engines from...General Electric.

In sum, it's marginally good news for GE, and it's contributing to the rise of GE stock today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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