Turbulent Airline Stocks in the Pre-Market
Today is Thursday February 27th, 2020. Over the last 2 weeks the market has seen a 9% drop on indices such as the Dow Jones Industrial Average. The market has been been extremely volatile as the fear regarding certain global conditions continue to rise.
A few of the aerospace stocks currently down in the pre-market session are Virgin Galactic Holding (SPCE) down 14.5%, American Airlines (AAL) with a loss of 4.26%, Honeywell (HON) -1.84%, Delta Airlines (DAL) -2.76%, Boeing (BA) -1.28%, Fedex (FDX) -1.76%, Air Transport Services (ATSG) -2.80%, Soutwest Airlines (LUV) -2.49% and General Dynamics (GD) -.87%.
The main element to hold accountable for the current change in market climate is the fear around the Corona Virus. As more reports are being announced from around over 47 countries, we are seeing the day to day affects the virus is causing worldwide. Japan has just recently announced that they will be closing down schools to protect the children from spreading the virus.
Transportation and logistics companies are seeing a sudden drop in demand as many factories and warehouses in china have closed doors. As less workers would be showing up to work the factories decided it would be best to close doors to protect the well being of the masses by not promoting the spread.
Interestingly enough today when you search through google to get an update on the Corona Virus, the top news articles that you find are the ones from financial market perspectives. This virus is showing to have the strength to not only kill thousands of people but to also bring global markets to a slow down.
Companies have announced that they will have to revise their annual goals for the year recognizing that due to the current conditions a lot of factors are going to need to change to ensure that the safety of the public is held at a priority.
Airlines are working diligently to ensure they are operating safely and sanitary as the travel to internationally. With there being so many individuals in a small space for such long periods of time the potential of bacteria spreading is very probably. There has been many publications highlighting the importance of taking precautions appropriately.
Boeing 737-MAX Collecting Dust
Boeing (BA) continues to have poor media being published regarding the progress of the 737-MAX. We are now seeing news reports that due to the 737-MAX simply sitting on the ramps idle without being in use they are beginning to collect sediment and dust particles inside of the aircraft.
Normally a little bit of dust is normal although when that dust happens to be found in sensitive flight areas such as the fuel tanks then that begins to create some concern. Now they may need to find a solution to clean the tanks interiors of any sediment and ensure they are being delivered at the highest safety standards.
With still no approval from the FAA we may not see the aircraft’s continue to sit for quite some time longer. With the factory at capacity with aircraft taking up every possible parking location space is tight. Working efficiently I can imagine is not easy.
The aviation industry has been hitting some turbulence in the past two weeks just like many of the other sectors in the New York Stock Exchange. Having fear in the markets direction often leads to individuals and corporations looking to secure their gains and. As a result as more uncertainty in the market rises then we can begin to see more individuals relocating their assets away from stocks and more into safe haven assets like gold and bonds.
Although the market has taken a very dramatic pullback it is important to understand what kind of time frame and investment style you are most comfortable with and find a strategy that is going to work best for you. Many investors are looking to actively buy into the next coming lows of the market. Other investors are riding the drops down as the market drops in value.
It is important to understand the various types of investors that are out in the market so that you understand the other individual whom you are playing against. The long term investors are buying in towards the intention of the stock or asset’s value rises thus as a result their share of that asset rises in value as well. They hold on to some assets during small influxes in the market. Although when things start to turn sour they often with look to sell back shares to ensure they are able to keep some profits.
Another key player in the market are those who are shorting the market. They are looking for opportunities to sell off shares when markets are high to then close the short at a lower price. Both individuals are in the market looking to gain from the current opportunity. This kind of drop will certainly require significant change for a recovery.
Up above you you can see the list of the stocks that dropped the most in the last week. The entire list experienced double digit losses for the last week. Having had such significant drop in price the market is looking quite poor overall.
As price just continues to fall it is looking to try and find some support to be able to sit on. With the market having pushed up so dramatically over the last few years many are uncertain where that next resistance will sit.
Drops in the market are natural and quite healthy. It allows for a correction of the market to take place. As the stock prices begin to create a new support level then we are able to as long term investors look to add on new positions in the stocks that we feel will strongly recover.
On the other side of the coin, Should you currently have positions open in the market experiencing loss of potential value using options contracts as a form of insurance on your stocks are a strategy that many investors use to be able to protect their capitol in the event of a dramatic drop in market valuation.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
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