Boeing 737 Max incident, groundings weigh on stock

Boeing (BA) shares are still in the red an hour out from Monday's market close. An incident involving a 737 Max 9 jet on an Alaska Airlines (ALK) flight has loomed over the stock all day.

Yahoo Finance's Jared Blikre joins the Live show to break down stock market reactions to Boeing's downturn and what it could mean for shares of Boeing-supplier Spirit Aerosystem (SPR).

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino.

Video Transcript

JOSH LIPTON: Shares of Boeing falling nearly 7% in trading today. It's after the FAA grounded more than 170 Boeing 737 MAX 9 aircraft after a door detached mid-air on an Alaska Airlines flight. With more on markets movements happening around that decision is Yahoo Finance's Jared Blikre. Jared.

JARED BLIKRE: Thank you, Josh. Let's take a look at our aerospace board. Not a lot of red, except for Boeing. And I'll show you another exception there. Down 6 and 1/2%. This is going to be the worst day for Boeing since late 2022. And as you can see, we've been in several different trading ranges here.

But let me just show you historically how the stock has reacted to a couple of different events. And the first would be the Lion Air Flight 610 in late 2018 and then Ethiopian Airlines Flight 302 in early 2019.

And what I've done is I've taken the stock action. I've shown one month before the event or 21 trading days along with 63 or one quarter's worth of trading days afterwards. And you can see in purple, that was the first incident.

We got a pretty steep decline, about 5%, 6%, 7% on the first day. Then the stock recovered pretty quickly. We did see some further fallout. But by the time the quarter had ended, the trailing quarter, we were kind of right back where we had started.

Now the Ethiopian Airlines, that second disaster, that's when we saw more fallout. There were two 5 plus down days in a row there at the very beginning. As you saw before, we're down about 6% today just by comparison.

And then you can see the stock really just drifted lower and had a tough time finding its footing. And eventually, it would drop pretty considerably. And let me just show you a five-year chart of Boeing going back to the beginning of this disaster.

So here is Boeing. Here is a five-year chart. And we had all of this price. Actually, let me put a 10-year chart. We had all of this price action up in here. Once this level went, it was a very quick drop, plus we had the pandemic. That compounded everything.

But you can see we are still in the bottom end of this very long trading range here. So if we were to jump above, we would have probably smooth sailing into the 300. But there's a considerable overhead resistance.

Also want to point out that one of the biggest suppliers here, one of the companies most dependent on Boeing for its revenue, that Spirit Aerosystem, seeing a 6% drop today. It's a more volatile stock. And if this chart looks somewhat similar to Boeing, that's because it is.

This was the same time period in which Boeing was trying to figure out its footing with respect to its highs. And then this drop was the same drop that we saw in Boeing. So two very different stocks reacting the same way to a tragic event here but not quite as bad as the earlier tragedies which involved the human life loss, of course.

- Well, Jared, this is the latest, like you said, in a series of mechanical failures for Boeing, two fatal crashes, one in Indonesia in 2018, the other in Ethiopia in 2019, like you said, both involving those Boeing 737s. What were the stock moves then? And how does that compare to what we're seeing today?

JARED BLIKRE: Well, I think they were quite a bit more dramatic. The first time this happened, this would be Lion Air Flight 610. We saw about a 5% drop on day one. But then by the second time we had Ethiopian Airlines flight, we not only got that first day drop, we got a big second day drop as well. And the difference between those two time periods, I think, was just the realization that something bigger was at play here.

When there was only one failure, you can see the stock recovered pretty quickly those losses. This was only a few trading days later, whereas with the second disaster, we saw it meandering down here and kind of lingering at the lows for some time. And then it just drifted lower with the sequence of bad news that was coming out.

So hard to say where we're falling in line this time. It's hard to see here. But this yellow line is pretty-- this yellow line here is pretty comparable to the first day drops that we saw for these earlier two. So so far it looks kind of the same. But I can't stress enough that these are very, very different scenarios.