The Dow Jones Industrial Average (^DJI +1.24%) was trading 95 points higher, or 0.57%, by midafternoon after markets were buoyed by the announcement that the European Central Bank had reduced interest rates and taken a number of other steps designed to boost bank lending. At a news conference, ECB President Mario Draghi said he was prepared to take additional measures.
"We think it is a significant package," Draghi said, according to Morningstar. "Are we finished? The answer is no. If need be, within our mandate, we aren't finished here."
That announcement helped push Caterpillar's stock higher inside the Dow, as it could benefit from increased lending and infrastructure spending in Europe. The heavy-equipment manufacturer was up 2.5% as of 3 p.m. EDT to stand as the index's best performer on the day.
The first 787 Dreamliner to roll out at 10 per month pace. Source: Boeing
Another top-performing Dow component today, up 1.2%, was Boeing (BA +2.58%). Today Boeing and Arke celebrated the arrival of the Dutch airline's first 787-8 Dreamliner.
"We are delighted that Arke, an all-Boeing operator, now has its first 787 and in the process becomes the first Dutch carrier to operate this revolutionary airplane," said Todd Nelp, vice president of European sales, Boeing Commercial Airplanes, in a press release.
Boeing says the 787 Dreamliner is the world's most technologically advanced airplane and uses 20% less fuel than today's similarly sized aircaft. The 787 Dreamliner also brings big-jet ranges to midsize airplanes. That's a compelling case for airlines to purchase the 787 Dreamliner, as fuel costs continue to rise as a percentage of overall costs.
While the 787 Dreamliner has been a big headache at times for investors and travelers, the advanced airplane will be a huge part of Boeing's future even if it today remains unprofitable. Boeing plans to increase production from the present 10 Dreamliners a month to 12 per month in 2016 and 14 per month by the end of the decade. If Boeing can ramp up production, reduce costs, and avoid any further headaches like the previous battery issue that grounded airplanes, the 787 will offer a big boost to investor confidence.
Outside the Dow, General Motors (GM +3.35%) has released 15 employees, including eight executives, following the internal investigation regarding its 11-year delay in recalling millions of cars for an ignition-switch defect that has been linked to 13 deaths. The report from former federal prosecutor Anton Valukas' can be read in full here (link opens PDF).
GM CEO Mary Barra in front of Senate Subcommittee earlier this year. Source: General Motors
General Motors CEO Mary Barra announced plans to set up a compensation fund for those affected by crashes related to the faulty ignition switch. Details of the plan have not been finalized and eligibility rules for the compensation fund will be set by an outside attorney, Kenneth Feinberg.
"We want everyone who has either lost a loved one or suffered serious injury to be part of the compensation program," Barra told reporters, clarifying that the program is voluntary, according to Automotive News.
General Motors this year in the U.S. alone has issued 30 individual recalls for roughly 13.8 million vehicles. The bad news for investors and consumers is that it's likely not over. To put those 13.8 million vehicles in context, consider that last year GM only had 23 individual recalls covering 757,677 vehicles. Barra said today that we can expect a few more recall announcements.
Thus far, this massive recall debacle hasn't put a dent in GM's vehicle sales, although the situation is far from over. Long-term investors would be wise to consider short-term costs from all the recalls, which amounted to roughly $1.7 billion through May, as well as potential brand image damage that could slow sales in the months, and perhaps years ahead.
