Confirmed cases of COVID-19 are surging in some U.S. states, and hospitalizations in those areas are on the rise. The stock market shook off the worsening pandemic news on Monday, with the Dow Jones Industrial Average (DJINDICES:^DJI) up 1.3% at 12:35 p.m. EDT.
Shares of Boeing (NYSE:BA) were up on Monday as the next phase of the process to get the 737 Max flying again was set to begin. Intel (NASDAQ:INTC) also rose along with the market despite an analyst downgrade.
Boeing's 737 Max faces more test flights
Last week, the changes Boeing made to the flight control system in the grounded 737 Max responsible for two fatal crashes were put through their paces in a series of certification test flights. This week, the plane will be put through another set of test flights by regulators.
The Wall Street Journal reported on Sunday that a series of test flights with federal pilots will begin as early as this week as part of an operational readiness review. The flights will further test the changes made to the 737 Max's flight control system.
If the tests are a success, the Federal Aviation Administration is expected to lift the order that grounded the 737 Max in September. Getting the plane back in the air will still require the finalization of pilot training mandates and maintenance requirements, but the Journal's sources see the 737 Max being authorized to carry passengers by the end of the year.
Whether there will be many passengers to carry is unclear. Air travel demand is still deeply depressed due to the pandemic, and the return of the 737 Max could coincide with a second wave of the novel coronavirus this winter. While passenger volumes have been improving, TSA data shows the total number of travelers going through checkpoints in the first five days of July was down nearly 70% from the same period last year.
Boeing stock rose along with the broader market on Monday, up 1% by early afternoon. Getting the 737 Max flying again will solve one big problem for the company, but the pandemic may lead to a years-long slump in demand.
Intel downgraded on PC weakness
A combination of an expected slowdown in the PC market and share losses to Advanced Micro Devices led analysts at Goldman Sachs to downgrade Intel stock on Monday. Goldman lowered its rating on the semiconductor giant from "neutral" to "sell," and knocked down its price target from $65 to $54.
Goldman's channel checks revealed a slowdown in PC builds for the second half of this year. In the first quarter of 2020, the global market for traditional PCs dropped 9.8% year over year partly due to supply constraints related to the novel coronavirus outbreak in China. In the U.S., increased working from home amid the pandemic led to a surge in demand for laptops, but that strong demand is unlikely to last during a recession.
Goldman also found that Intel was losing market share in both the PC and server CPU markets to AMD. In the PC market, AMD's Ryzen processors have given Intel its first taste of real competition in years. In the server market, AMD's EPYC processors have provided customers a viable alternative to Intel's pricey chips. Goldman expects Intel's gross margin to decline in the coming years as it faces increased competition.
The downgrade wasn't quite enough to derail Intel stock on Monday. Shares were up about 0.3% by early afternoon.