Thursday morning got off to a good start for most financial markets, as positive sentiment built up heading into this weekend's meeting of key national leaders in Japan. News that Chinese President Xi Jinping will present potential terms of a temporary truce in the trade conflict with the U.S. seemed to give investors more hope that a favorable resolution is possible. As of just before 11:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was down 61 points to 26,476. However, the S&P 500 (SNPINDEX: ^GSPC) rose 8 points to 2,922, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was higher by 38 points to 7,948.
The primary reason why the Dow didn't follow other major benchmarks higher was that Boeing (NYSE: BA), whose high stock price has a lot of influence on the price-weighted average, ran into new problems with its 737 MAX aircraft that made it the Dow's biggest decliner. Meanwhile, WageWorks (NYSE: WAGE) announced that it had agreed to a merger deal with fellow benefits specialist HealthEquity (NASDAQ: HQY) -- and the resulting move in the two stocks might have surprised casual watchers.
Boeing needs more fixes
Shares of Boeing were down 2.5% Thursday morning as investors reacted negatively to news from the U.S. Federal Aviation Administration about the 737 MAX aircraft model. After having been grounded since March, the MAX program now faces a newly discovered fault that could require additional remedial work to address.
The FAA said that it conducted a simulator test and discovered a new risk affecting the plane. The agency released few details, but Boeing disclosed that the FAA has specifically asked it to consider additional changes to its MAX software to cover an issue that the aerospace giant hasn't addressed previously.
As a consequence of the new discovery, Boeing won't be able to conduct a certification test flight that had been scheduled for early next month. That could further delay the return of the MAX to service, which in turn will have negative implications for the airlines that have been early adopters of the aircraft. Despite the pressure to move forward quickly, Boeing is insistent that it won't bring the 737 MAX forward for certification until it's satisfied that the plane meets all FAA safety requirements.
WageWorks finally takes the deal
Meanwhile, shares of WageWorks were down 2% Thursday morning. The employee benefits specialist announced that it had agreed to an acquisition offer from HealthEquity valuing WageWorks at $2 billion. Under the terms of the deal, WageWorks investors will receive $51.35 per share in cash for their stock.
The news comes nearly two full months after HealthEquity had made an unsolicited bid for the company. The health savings account specialist's initial offer had been $50.50 per share in cash, but WageWorks stock had traded above that level in the hopes that the two companies would end up negotiating a higher price. In the end, though, the extra $0.85 per share seemed to be a win for HealthEquity, whose stock jumped 5% this morning.
The two companies believe that the merger will help accelerate their joint efforts to have more employers offer health savings accounts as part of their health benefits. HealthEquity was a pioneer in the HSA custodian arena, and WageWorks recently made a deal with industry peer BenefitFocus to boost its own HSA presence. At the same time, synergies could produce annualized savings of $50 million within the first two or three years after closing.
For workers, health savings accounts can produce both tax savings and the opportunity for investment gains. HealthEquity hopes to dominate that business, and its success could eventually bring better benefit packages for the employees of the combined company's clients.
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