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Stock Markets Open Mixed as American Cuts Flights, Goodyear Deals With Boycott

By Dan Caplinger – Aug 20, 2020 at 11:59AM

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The Nasdaq continued to do better than the broader market.

The stock market has shown time and time again that it's resilient even in the face of significant uncertainty. With the COVID-19 pandemic and its economic impact continuing to make the future unpredictable, you'd think major benchmarks would be under more pressure. Yet after a modest decline Wednesday, indexes bounced back from early losses Thursday morning to hover near the unchanged level. Just before 11 a.m. EDT, the Dow Jones Industrial Average (^DJI -1.15%) was down 18 points to 27,675. However, the S&P 500 (^GSPC -1.02%) managed to rise 2 points to 3,377, and the Nasdaq Composite (^IXIC) picked up 57 points to 11,204.

There wasn't a whole lot of market-moving news Thursday, but a few companies did garner some attention. American Airlines Group (AAL -1.09%) is having to deal with not knowing what will happen with federal aid after the end of September, and some of its actions aren't inspiring confidence among investors. Meanwhile, Goodyear Tire & Rubber (GT -1.92%) is doing what it can to offset calls for a boycott of its tires.

What the fall could bring for air travelers

Shares of American Airlines Group fell 2%. Investors have wondered what the air carrier would do after its commitments under the federal aid packages it received end at the beginning of October, and today, American gave them a glimpse of what to expect.

American said that it would suspend service to 15 small U.S. markets beginning Oct. 7, assuming that federal aid doesn't get renewed in an upcoming stimulus package. Affected cities include Dubuque, Roswell, and Little League World Series mecca Williamsport. For now, the suspensions will last just four weeks through Nov. 3, but extensions could easily follow.

Yet the airline left the door open to more extensive cuts. With cash burn rates still at problematic levels, it's likely that American will have to keep evaluating where it can make additional reductions in service to match up with its revenue.

American's move puts some pressure on Washington to move forward with stimulus package negotiations. There's bipartisan backing for an extension of airline support through next March, but there's no telling whether Congress will get its act together and pass a bill to help not only American but all airline stocks.

Worker wearing hat next to a conveyor belt with a Goodyear brand tire.

Image source: Goodyear Tire & Rubber.

Bad times for Goodyear

Shares of Goodyear managed to limit losses to just a fraction of a percent. Nevertheless, the tire maker remains in the spotlight for comments made from the White House.

On Wednesday, President Trump tweeted that people should boycott Goodyear tires, seemingly based on his understanding of a company policy regarding political attire. Goodyear responded with an explanation for its policy on political campaigning, explaining that to respect the diverse views of its tens of thousands of employees, the company asks workers not to do any sort of campaigning in the workplace.

Goodyear has already faced challenges during the COVID-19 pandemic. Second-quarter revenue plunged 41% from year-earlier levels as industry volumes fell precipitously. Huge net losses reversed gains from the same period in 2019. Since then, all of its factories have resumed production and not faced any coronavirus-related disruptions, but Goodyear expects lower inventory levels to prevail throughout the second half of the year.

Investors seem to be largely shrugging off the incident as a non-event, but Goodyear is still taking it seriously. With so many obstacles to overcome already, the last thing Goodyear needs is an unnecessary headwind from Washington.

Dan Caplinger 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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Stocks Mentioned

Goodyear Tire & Rubber Stock Quote
Goodyear Tire & Rubber
GT
$11.22 (-1.92%) $0.22
American Airlines Group Stock Quote
American Airlines Group
AAL
$12.73 (-1.09%) $0.14
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,926.94 (-1.15%) $-346.93
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,744.52 (-1.02%) $-38.76
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,148.64 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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