Investors wasted no time getting into the spirit of the summer vacation on Wall Street as it made a solid profit on Monday even amid growing uncertainty.
COVID-19 cases have skyrocketed further in the U.S., and some fear that failing to contain the outbreak could lead to renewed measures such as business closings. However, market participants focused on more positive news, sending the Dow Jones Industrial Average (DJINDICES: ^ DJI), S&P 500 (SNPINDEX: ^ SPX)and Nasdaq compound higher.
Stock market today
|
Index |
Percentage change |
Point change |
|---|---|---|
|
Dow |
+ 2.32% |
+580 |
|
S&P 500 |
+ 1.47% |
+44 |
|
Nasdaq compound |
+ 1.20% |
+117 |
Data source: Yahoo! Finance.
Among the best in the market on Monday were airline stocks. Although they have been quite sensitive to the news related to the coronavirus, the optimism that drove the broader market also helped raise their prospects. Also, good news from Boeing (NYSE: BA) It could signal the end of at least one painful chapter for the industry.
How did the airlines fare
Among the main operators, Southwest Airlines (NYSE: LUV) led the highest path with earnings of almost 10%. American Airlines Group (NASDAQ: AAL) was not far behind with an 8% increase, and United Airlines Holdings (NASDAQ: UAL) and Delta airlines (NYSE: DAL) it did the same with earnings of 7% and 6% respectively.
Southwest in particular benefited from favorable comments from analysts at Goldman Sachs. The Wall Street giant improved its Southwest view from “sell” to “buy,” and raised its target price by $ 12 a share to $ 47. Goldman’s opinion on the industry is mixed, and analysts now expect it to take until 2023 for a full return to pre-coronavirus conditions for airlines. However, Southwest has a solid balance sheet, and its emphasis on domestic travel gives it a competitive advantage over more internationally focused Americans, Delta and United. There, international travel restrictions could last longer, extending the payback period.
More generally, investors like what they see fundamentally. Traffic numbers continue to rise, and that is highly hopeful that load factors will follow suit. Some carriers have even begun to relax their previous coronavirus measures, no longer requiring that the center seats remain empty. American hopes to book full flights as soon as July 1, and United also intends to start accommodating three aside soon.
Image source: Boeing.
MAX flight
The airlines could also have received a boost from favorable news from Boeing, whose shares soared 14%. The aerospace manufacturer obtained approval to begin test flights on the long-haul 737 MAX aircraft, and its first flight to certification occurred earlier today.
From Boeing’s perspective, the benefits of having the MAX fly are obvious. However, what is less clear is how much demand there will be from the main airlines. Airlines have landed large portions of their existing fleets during the coronavirus crisis, and it will take a significant increase in passenger traffic just to return to full capacity based on existing stocks.
Airlines that are financially able to receive delivery can still choose to do so. Efficiency gains and other benefits led to high demand for the 737 MAX before multiple accidents forced its grounding. However, since airlines face great financial pressures, it is dangerous to assume that all deliveries will take place as previously expected.
Airlines looked healthier today and conditions appear to be improving. But there is still a lot of uncertainty affecting airline stocks, and investors must be prepared for a bumpy ride ahead.
