NEW DELHI (Reuters) -India’s air safety regulator has sought more information from Boeing Co after an emergency power system was activated on an Air India 787 Dreamliner on Saturday, a government source with direct knowledge of the matter said.
Boeing and Air India spokespersons did not immediately respond to requests for comment.
The crew of the aircraft – which was flying from the northern Indian city of Amritsar to Birmingham, UK – detected deployment of the power system, known as the Ram Air Turbine, during the final approach, Air India said on Sunday.
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In July, Indian investigators said the RAT had been deployed during the initial climb before the Air India Boeing 787 crash which killed 260 people the previous month.
A preliminary report by Indian investigators showed the plane's fuel engine switches had almost simultaneously flipped from run to cutoff just after takeoff.
(Reporting by Abhijith Ganapavaram; Editing by Aditya Kalra, Kirsten Donovan)
People hold signs during a strike rally for the International Association of Machinists and Aerospace Workers (IAM) at the Seattle Union Hall in Seattle, Washington, on October 15, 2024.
Jason Redmond | AFP | Getty Images
Boeing machinists voted against a new labor deal that included 35% wage increases over four years, their union said Wednesday, extending a more than five-week strike that has halted most of the company’s aircraft production, which is centered in the Seattle area.
The contract’s rejection by 64% of the voters is another major setback for the company, which warned earlier Wednesday that it would continue to burn cash through 2025 and reported a $6 billion quarterly loss, its largest since 2020.
The strike is costing the company about $1 billion a month, according to S&P Global Ratings.
New CEO Kelly Ortberg had said reaching a deal with machinists was a priority in order to get the company back on track after years of safety and quality problems.
“My focus is getting everybody looking forward, get them back to work, improve that relationship,” Ortberg told CNBC’s “Squawk on the Street” earlier in the day, when asked about the strike.
Ortberg’s laid out his vision for Boeing’s future, which could includes slimming down the company to focus on core businesses. Earlier this month, he announced Boeing will cut 10% of its global workforce of 170,000 people.
Boeing’s more than 32,000 machinists in the Puget Sound area, in Oregon and in other locations walked off the job on Sept. 13 after overwhelmingly voting down a previous tentative agreement that proposed raises of 25%. The International Association of Machinists and Aerospace Workers union had originally sought wage increases of 40%. It is the machinists’ first strike since 2008.
The latest proposal, announced last Saturday, included 35% raises over four years, increased 401(k) contributions, a $7,000 bonus and other improvements.
Workers had pushed for higher pay amid a surge in living costs in the Puget Sound area. Some machinists were upset about losing their pension plan in a previous contract that they signed in 2014, but the latest proposal didn’t offer a pension.
Boeing agreed in the new contract to build its next aircraft in the Pacific Northwest, which had also been a sticking point with unionized workers after Boeing moved all of its 787 Dreamliner production to a non-union factory in South Carolina.
“We have made tremendous gains in this agreement. However, we have not achieved enough to meet our members’ demands,” said Jon Holden, president of IAM District 751, at a news conference Wednesday night. He said the union will push to go back to the negotiating table.
Boeing declined to comment on the voting results.
The labor strife is the latest in a long list of problems at Boeing, which started the year when a door plug blew out midair from a packed Boeing 737 Max 9, its best-selling plane, reigniting regulator scrutiny of the company.
The strike began as Boeing was working to ramp up production of the 737 and other aircraft.
The extended stoppage is also a challenge for the aerospace supply chain, which is fragile coming out of the pandemic, as the company’s web of suppliers had to train new workers quickly.
Spirit AeroSystems last week said it would temporarily furlough about 700 workers and that layoffs or other furloughs are possible if Boeing machinists’ strike continues.
Former President Donald Trump and Vice President Kamala Harris face off in the ABC presidential debate on Sept. 10, 2024.
Getty Images
With the U.S. election less than a month away, the country and its corporations are staring down two drastically different options.
For airlines, banks, electric vehicle makers, health-care companies, media firms, restaurants and tech giants, the outcome of the presidential contest could result in stark differences in the rules they’ll face, the mergers they’ll be allowed to pursue, and the taxes they’ll pay.
During his last time in power, former President Donald Trump slashed the corporate tax rate, imposed tariffs on Chinese goods, and sought to cut regulation and red tape and discourage immigration, ideas he’s expected to push again if he wins a second term.
In contrast, Vice President Kamala Harris has endorsed hiking the tax rate on corporations to 28% from the 21% rate enacted under Trump, a move that would require congressional approval. Most business executives expect Harris to broadly continue President Joe Biden‘s policies, including his war on so-called junk fees across industries.
Personnel is policy, as the saying goes, so the ramifications of the presidential race won’t become clear until the winner begins appointments for as many as a dozen key bodies, including the Treasury, Justice Department, Federal Trade Commission, and Consumer Financial Protection Bureau.
CNBC examined the stakes of the 2024 presidential election for some of corporate America’s biggest sectors. Here’s what a Harris or Trump administration could mean for business:
The result of the presidential election could affect everything from what airlines owe consumers for flight disruptions to how much it costs to build an aircraft in the United States.
The Biden Department of Transportation, led by Secretary Pete Buttigieg, has taken a hard line on filling what it considers to be holes in air traveler protections. It has established or proposed new rules on issues including refunds for cancellations, family seating and service fee disclosures, a measure airlines have challenged in court.
“Who’s in that DOT seat matters,” said Jonathan Kletzel, who heads the travel, transportation and logistics practice at PwC.
The current Democratic administration has also fought industry consolidation, winning two antitrust lawsuits that blocked a partnership between American Airlines and JetBlue Airways in the Northeast and JetBlue’s now-scuttled plan to buy budget carrier Spirit Airlines.
The previous Trump administration didn’t pursue those types of consumer protections. Industry members say that under Trump, they would expect a more favorable environment for mergers, though four airlines already control more than three-quarters of the U.S. market.
On the aerospace side, Boeing and the hundreds of suppliers that support it are seeking stability more than anything else.
Trump has said on the campaign trail that he supports additional tariffs of 10% or 20% and higher duties on goods from China. That could drive up the cost of producing aircraft and other components for aerospace companies, just as a labor and skills shortage after the pandemic drives up expenses.
Tariffs could also challenge the industry, if they spark retaliatory taxes or trade barriers to China and other countries, which are major buyers of aircraft from Boeing, a top U.S. exporter.
Big banks such as JPMorgan Chase faced an onslaught of new rules this year as Biden appointees pursued the most significant slate of regulations since the aftermath of the 2008 financial crisis.
Those efforts threaten tens of billions of dollars in industry revenue by slashing fees that banks impose on credit cards and overdrafts and radically revising the capital and risk framework they operate in. The fate of all of those measures is at risk if Trump is elected.
Trump is expected to nominate appointees for key financial regulators, including the CFPB, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation that could result in a weakening or killing off completely of the myriad rules in play.
“The Biden administration’s regulatory agenda across sectors has been very ambitious, especially in finance, and large swaths of it stand to be rolled back by Trump appointees if he wins,” said Tobin Marcus, head of U.S. policy at Wolfe Research.
Bank CEOs and consultants say it would be a relief if aspects of the Biden era — an aggressive CFPB, regulators who discouraged most mergers and elongated times for deal approvals — were dialed back.
“It certainly helps if the president is Republican, and the odds tilt more favorably for the industry if it’s a Republican sweep” in Congress, said the CEO of a bank with nearly $100 billion in assets who declined to be identified speaking about regulators.
Still, some observers point out that Trump 2.0 might not be as friendly to the industry as his first time in office.
Trump’s vice presidential pick, Sen. JD Vance, of Ohio, has often criticized Wall Street banks, and Trump last month began pushing an idea to cap credit card interest rates at 10%, a move that if enacted would have seismic implications for the industry.
Bankers also say that Harris won’t necessarily cater to traditional Democratic Party ideas that have made life tougher for banks. Unless Democrats seize both chambers of Congress as well as the presidency, it may be difficult to get agency heads approved if they’re considered partisan picks, experts note.
“I would not write off the vice president as someone who’s automatically going to go more progressive,” said Lindsey Johnson, head of the Consumer Bankers Association, a trade group for big U.S. retail banks.
Electric vehicles have become a polarizing issue between Democrats and Republicans, especially in swing states such as Michigan that rely on the auto industry. There could be major changes in regulations and incentives for EVs if Trump regains power, a fact that’s placed the industry in a temporary limbo.
“Depending on the election in the U.S., we may have mandates; we may not,” Volkswagen Group of America CEO Pablo Di Si said Sept. 24 during an Automotive News conference. “Am I going to make any decisions on future investments right now? Obviously not. We’re waiting to see.”
Republicans, led by Trump, have largely condemned EVs, claiming they are being forced upon consumers and that they will ruin the U.S. automotive industry. Trump has vowed to roll back or eliminate many vehicle emissions standards under the Environmental Protection Agency and incentives to promote production and adoption of the vehicles.
If elected, he’s also expected to renew a battle with California and other states who set their own vehicle emissions standards.
“In a Republican win … We see higher variance and more potential for change,” UBS analyst Joseph Spak said in a Sept. 18 investor note.
In contrast, Democrats, including Harris, have historically supported EVs and incentives such as those under the Biden administration’s signature Inflation Reduction Act.
Harris hasn’t been as vocal a supporter of EVs lately amid slower-than-expected consumer adoption of the vehicles and consumer pushback. She has said she does not support an EV mandate such as the Zero-Emission Vehicles Act of 2019, which she cosponsored during her time as a senator, that would have required automakers to sell only electrified vehicles by 2040. Still, auto industry executives and officials expect a Harris presidency would be largely a continuation, though not a copy, of the past four years of Biden’s EV policy.
They expect some potential leniency on federal fuel economy regulations but minimal changes to the billions of dollars in incentives under the IRA.
Both Harris and Trump have called for sweeping changes to the costly, complicated and entrenched U.S. health-care system of doctors, insurers, drug manufacturers and middlemen, which costs the nation more than $4 trillion a year.
Despite spending more on health care than any other wealthy country, the U.S. has the lowest life expectancy at birth, the highest rate of people with multiple chronic diseases and the highest maternal and infant death rates, according to the Commonwealth Fund, an independent research group.
Meanwhile, roughly half of American adults say it is difficult to afford health-care costs, which can drive some into debt or lead them to put off necessary care, according to a May poll conducted by health policy research organization KFF.
Both Harris and Trump have taken aim at the pharmaceutical industry and proposed efforts to lower prescription drug prices in the U.S., which are nearly three times higher than those seen in other countries.
But many of Trump’s efforts to lower costs have been temporary or not immediately effective, health policy experts said. Meanwhile, Harris, if elected, can build on existing efforts of the Biden administration to deliver savings to more patients, they said.
Harris specifically plans to expand certain provisions of the IRA, part of which aims to lower health-care costs for seniors enrolled in Medicare. Harris cast the tie-breaking Senate vote to pass the law in 2022.
Her campaign says she plans to extend two provisions to all Americans, not just seniors: a $2,000 annual cap on out-of-pocket drug spending and a $35 limit on monthly insulin costs.
Harris also intends to accelerate and expand a provision allowing Medicare to directly negotiate drug prices with manufacturers for the first time. Drugmakers fiercely oppose those price talks, with some challenging the effort’s constitutionality in court.
Trump hasn’t publicly indicated what he intends to do about IRA provisions.
Some of Trump’s prior efforts to lower drug prices “didn’t really come into fruition” during his presidency, according to Dr. Mariana Socal, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.
For example, he planned to use executive action to have Medicare pay no more than the lowest price that select other developed countries pay for drugs, a proposal that was blocked by court action and later rescinded.
Trump also led multiple efforts to repeal the Affordable Care Act, including its expansion of Medicaid to low-income adults. In a campaign video in April, Trump said he was not running on terminating the ACA and would rather make it “much, much better and far less money,” though he has provided no specific plans.
He reiterated his belief that the ACA was “lousy health care” during his Sept. 10 debate with Harris. But when asked he did not offer a replacement proposal, saying only that he has “concepts of a plan.”
Top of mind for media executives is mergers and the path, or lack thereof, to push them through.
The media industry’s state of turmoil — shrinking audiences for traditional pay TV, the slowdown in advertising, and the rise of streaming and challenges in making it profitable — means its companies are often mentioned in discussions of acquisitions and consolidation.
While a merger between Paramount Global and Skydance Media is set to move forward, with plans to close in the first half of 2025, many in media have said the Biden administration has broadly chilled deal-making.
“We just need an opportunity for deregulation, so companies can consolidate and do what we need to do even better,” Warner Bros. Discovery CEO David Zaslav said in July at Allen & Co.’s annual Sun Valley conference.
Media mogul John Malone recently told MoffettNathanson analysts that some deals are a nonstarter with this current Justice Department, including mergers between companies in the telecommunications and cable broadband space.
Still, it’s unclear how the regulatory environment could or would change depending on which party is in office. Disney was allowed to acquire Fox Corp.’s assets when Trump was in office, but his administration sued to block AT&T’s merger with Time Warner. Meanwhile, under Biden’s presidency, a federal judge blocked the sale of Simon & Schuster to Penguin Random House, but Amazon’s acquisition of MGM was approved.
“My sense is, regardless of the election outcome, we are likely to remain in a similar tighter regulatory environment when looking at media industry dealmaking,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.
When major media, and even tech, assets change hands, it could also mean increased scrutiny on those in control and whether it creates bias on the platforms.
“Overall, the government and FCC have always been most concerned with having a diversity of voices,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investment. “But then [Elon Musk’s purchase of Twitter] happened, and it’s clearly showing you can skew a platform to not just what the business needs, but to maybe your personal approach and whims,” he said.
Since Musk acquired the social media platform in 2022, changing its name to X, he has implemented sweeping changes including cutting staff and giving “amnesty” to previously suspended accounts, including Trump’s, which had been suspended following the Jan. 6, 2021, Capitol insurrection. Musk has also faced widespread criticism from civil rights groups for the amplification of bigotry on the platform.
Musk has publicly endorsed Trump, and was recently on the campaign trail with the former president. “As you can see, I’m not just MAGA, I’m Dark MAGA,” Musk said at a recent event. The billionaire has raised funds for Republican causes, and Trump has suggested Musk could eventually play a role in his administration if the Republican candidate were to be reelected.
During his first term, Trump took a particularly hard stance against journalists, and pursued investigations into leaks from his administration to news organizations. Under Biden, the White House has been notably more amenable to journalists.
Also top of mind for media executives — and government officials — is TikTok.
Lawmakers have argued that TikTok’s Chinese ownership could be a national security risk.
Earlier this year, Biden signed legislation that gives Chinese parent ByteDance until January to find a new owner for the platform or face a U.S. ban. TikTok has said the bill, the Protecting Americans From Foreign Adversary Controlled Applications Act, which passed with bipartisan support, violates the First Amendment. The platform has sued the government to stop a potential ban.
While Trump was in office, he attempted to ban TikTok through an executive order, but the effort failed. However, he has more recently switched to supporting the platform, arguing that without it there’s less competition against Meta’s Facebook and other social media.
Both Trump and Harris have endorsed plans to end taxes on restaurant workers’ tips, although how they would do so is likely to differ.
The food service and restaurant industry is the nation’s second-largest private-sector employer, with 15.5 million jobs, according to the National Restaurant Association. Roughly 2.2 million of those employees are tipped servers and bartenders, who could end up with more money in their pockets if their tips are no longer taxed.
Trump’s campaign hasn’t given much detail on how his administration would eliminate taxes on tips, but tax experts have warned that it could turn into a loophole for high earners. Claims from the Trump campaign that the Republican candidate is pro-labor have clashed with his record of appointing leaders to the National Labor Relations Board who have rolled back worker protections.
Meanwhile, Harris has said she’d only exempt workers who make $75,000 or less from paying income tax on their tips, but the money would still be subject to taxes toward Social Security and Medicare, the Washington Post previously reported.
In keeping with the campaign’s more labor-friendly approach, Harris is also pledging to eliminate the tip credit: In 37 states, employers only have to pay tipped workers the minimum wage as long as that hourly wage and tips add up to the area’s pay floor. Since 1991, the federal pay floor for tipped wages has been stuck at $2.13.
“In the short term, if [restaurants] have to pay higher wages to their waiters, they’re going to have to raise menu prices, which is going to lower demand,” said Michael Lynn, a tipping expert and Cornell University professor.
Whichever candidate comes out ahead in November will have to grapple with the rapidly evolving artificial intelligence sector.
Generative AI is the biggest story in tech since the launch of OpenAI’s ChatGPT in late 2022. It presents a conundrum for regulators, because it allows consumers to easily create text and images from simple queries, creating privacy and safety concerns.
Harris has said she and Biden “reject the false choice that suggests we can either protect the public or advance innovation.” Last year, the White House issued an executive order that led to the formation of the Commerce Department’s U.S. AI Safety Institute, which is evaluating AI models from OpenAI and Anthropic.
Trump has committed to repealing the executive order.
A second Trump administration might also attempt to challenge a Securities and Exchange Commission rule that requires companies to disclose cybersecurity incidents. The White House said in January that more transparency “will incentivize corporate executives to invest in cybersecurity and cyber risk management.”
Trump’s running mate, Vance, co-sponsored a bill designed to end the rule. Andrew Garbarino, the House Republican who introduced an identical bill, has said the SEC rule increases cybersecurity risk and overlaps with existing law on incident reporting.
Also at stake in the election is the fate of dealmaking for tech investors and executives.
With Lina Khan helming the FTC, the top tech companies have been largely thwarted from making big acquisitions, though the Justice Department and European regulators have also created hurdles.
Tech transaction volume peaked at $1.5 trillion in 2021, then plummeted to $544 billion last year and $465 billion in 2024 as of September, according to Dealogic.
Many in the tech industry are critical of Khan and want her to be replaced should Harris win in November. Meanwhile, Vance, who worked in venture capital before entering politics, said as recently as February — before he was chosen as Trump’s running mate — that Khan was “doing a pretty good job.”
Khan, whom Biden nominated in 2021, has challenged Amazon and Meta on antitrust grounds and has said the FTC will investigate AI investments at Alphabet, Amazon and Microsoft.
Workers picket outside a Boeing Co. facility during a strike in Everett, Washington, US, on Monday, Sept. 16, 2024. Boeing Co. factory workers walked off the job for the first time in 16 years, halting manufacturing across the planemaker’s Seattle hub after members of its largest union voted overwhelmingly to reject a contract offer and go on strike.
M. Scott Brauer | Bloomberg | Getty Images
Boeing withdrew a contract offer for 33,000 machinists who have been on strike since mid-September, and said further negotiations “do not make sense at this point.”
The machinists walked off the job on Sept. 13 after overwhelmingly rejecting a tentative labor deal, halting production of most of Boeing’s aircraft, which are made in the Puget Sound area. Boeing later sweetened the offer, increasing pay raises, a ratification bonus and other improvements, which the union turned down, arguing that it was not negotiated.
Talks again broke down this week, meaning the strike will continue. The stoppage will cost Boeing more than $1 billion per month, S&P Global Ratings said Tuesday as it issued a negative outlook for the aerospace giant’s credit ratings.
Stephanie Pope, CEO of Boeing’s commercial aircraft unit, said the company improved contract pay during talks this week but said the union didn’t consider the proposals.
“Instead, the union made non-negotiable demands far in excess of what can be accepted if we are to remain competitive as a business,” Pope said in a staff note.
The union, the International Association of Machinists and Aerospace Workers, said Tuesday that Boeing refused to improve wages, retirement plans and vacation or sick leave.
A view of a SpaceX rocket, as seen across the Rio Grande in Brownsville, Texas, U.S., July 22, 2024.
Veronica Cardenas | Reuters
SpaceX launched a rescue mission for the two stuck astronauts at the International Space Station on Saturday, sending up a downsized crew to bring them home but not until next year.
Since NASA rotates space station crews approximately every six months, this newly launched flight with two empty seats reserved for Wilmore and Williams won’t return until late February. Officials said there wasn’t a way to bring them back earlier on SpaceX without interrupting other scheduled missions.
By the time they return, the pair will have logged more than eight months in space. They expected to be gone just a week when they signed up for Boeing’s first astronaut flight that launched in June.
NASA ultimately decided that Boeing’s Starliner was too risky after a cascade of thruster troubles and helium leaks marred its trip to the orbiting complex. The space agency cut two astronauts from this SpaceX launch to make room on the return leg for Wilmore and Williams.
Williams has since been promoted to commander of the space station, which will soon be back to its normal population of seven. Once Hague and Gorbunov arrive this weekend, four astronauts living there since March can leave in their own SpaceX capsule. Their homecoming was delayed a month by Starliner’s turmoil.
Hague noted before the flight that change is the one constant in human spaceflight.
“There’s always something that is changing. Maybe this time it’s been a little more visible to the public,” he said.
Hague was thrust into the commander’s job for the rescue mission based on his experience and handling of a launch emergency six years ago. The Russian rocket failed shortly after liftoff, and the capsule carrying him and a cosmonaut catapulted off the top to safety.
Rookie NASA astronaut Zena Cardman and veteran space flier Stephanie Wilson were pulled from this flight after NASA opted to go with SpaceX to bring the stuck astronauts home. The space agency said both would be eligible to fly on future missions. Gorbunov remained under an exchange agreement between NASA and the Russian Space Agency.
“I don’t know exactly when my launch to space will be, but I know that I will get there,” Cardman said from NASA’s Kennedy Space Center, where she took part in the launch livestream.
Hague acknowledged the challenges of launching with half a crew and returning with two astronauts trained on another spacecraft.
“We’ve got a dynamic challenge ahead of us,” Hague said after arriving from Houston last weekend. “We know each other and we’re professionals and we step up and do what’s asked of us.”
SpaceX has long been the leader in NASA’s commercial crew program, established as the space shuttles were retiring more than a decade ago. SpaceX beat Boeing in delivering astronauts to the space station in 2020 and it’s now up to 10 crew flights for NASA.
Boeing has struggled with a variety of issues over the years, repeating a Starliner test flight with no one on board after the first one veered off course. The Starliner that left Wilmore and Williams in space landed without any issues in the New Mexico desert on Sept. 6, and has since returned to Kennedy Space Center. A week ago, Boeing’s defense and space chief was replaced.
Delayed by Hurricane Helene pounding Florida, the latest SpaceX liftoff marked the first for astronauts from Launch Complex 40 at Cape Canaveral Space Force Station. SpaceX took over the old Titan rocket pad nearly two decades ago and used it for satellite launches, while flying crews from Kennedy’s former Apollo and shuttle pad next door. The company wanted more flexibility as more Falcon rockets soared.
A Southwest Airlines plane takes off from Hartsfield-Jackson Atlanta International Airport (ATL) in Atlanta, Georgia, US, on Friday, July 12, 2024.
Elijah Nouvelage | Bloomberg | Getty Images
Southwest Airlines is planning to reduce service to and from Atlanta next year, cutting more than 300 pilot and flight attendant positions, according to a company memo seen by CNBC.
The changes come a day before Southwest’s investor day, when executives will map out the company’s plan to cut costs and grow revenue as pressure mounts from activist investor Elliott Investment Management.
Southwest told staff it isn’t closing its crew base in Atlanta. Instead, it will reduce staffing by as many as 200 flight attendants and as many as 140 pilots, for the April 2025 bid month.
The airline also isn’t laying the crews off, but they will likely have to bid to work from other cities.
Read more CNBC airline news
Southwest will reduce its Atlanta presence to 11 gates next year from 18, according to a separate memo from the pilots’ union.
It will service 21 cities from Atlanta starting next April, down from 37 in March, the carrier said.
“Although we try everything we can before making difficult decisions like this one, we simply cannot afford continued losses and must make this change to help restore our profitability,” Southwest said in its memo. “This decision in no way reflects our Employees’ performance, and we’re proud of the Hospitality and the efforts they have made and will continue to make with our Customers in ATL.”
The unions that represent Southwest’s pilot and flight attendants railed against the airline for the staffing and service cuts.
“Southwest Airlines management is failing Employees while impacting Customers. Management continues to make decisions that lack full transparency, sufficient communication with Union leadership, and most alarmingly, a lack of focus on what has made the airline great, the Employees,” said Bill Bernal, the flight attendants’ union president.
A Southwest spokesman confirmed the changes and said the carrier will “continue to optimize our network to meet customer demand, best utilize our fleet, and maximize revenue opportunities.”
Travelers check in at a Southwest counter at Hartsfield-Jackson Atlanta International Airport (ATL) in Atlanta, Georgia, US, on Tuesday, July 23, 2024.
Elijah Nouvelage | Bloomberg | Getty Images
The airline had already pulled out of certain airports, some of which it experimented with during the pandemic to focus on more profitable service.
Southwest is not only facing changing booking patterns and oversupplied parts of the U.S. market but aircraft delays from Boeing, whose yet-to-be-certified 737 Max 7 airplanes are years behind schedule
The airline’s COO, Andrew Watterson, told staff last week that it will have to make “difficult decisions” to boost profits.
The reduction in Atlanta, the world’s busiest airport and Delta Air Lines home hub, is the latest development for the airline. In July, Southwest announced it plans to get rid of open seating and offer extra legroom on its airplanes, the biggest changes in its more than half-century of flying.
Also on Wednesday, Southwest released an expanded schedule, selling tickets through June 4. In addition to the planned cuts in Atlanta, the carrier said it will boost service to and from Nashville, Tennessee. It will also start offering overnight flights from Hawaii, beginning April 8. Those include service from Honolulu to Las Vegas and Phoenix; Kona, Hawaii, to Las Vegas; and Maui, Hawaii, to Las Vegas and Phoenix.
Neel Kashkari, President and CEO, Federal Reserve Bank of Minneapolis, speaks at the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, California, U.S., May 7, 2024.
David Swanson | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Markets regain momentum U.S. markets rose Monday, with the S&P 500 and Dow Jones Industrial Average notching fresh closing highs. Asia-Pacific stocks mostly climbed Tuesday, with the Chinese and Hong Kong markets popping over 3% on Beijing’s announcement of policy easing measures.
PBOC policy easing The People’s Bank of China Governor Pan Gongsheng on Tuesday announced a cut to banks’ reserve requirement ratio. That means banks won’t need as much cash on hand, which injects liquidity into the economy. The yields on Chinese bonds, in turn, dropped to record lows after the PBOC’s announcement.
New property stimulus in China At the same press conference, the PBOC governor also said Beijing will reduce interest rates on existing individual mortgages by an average of half a percentage point, and lower the down-payment ratio for second home purchases to 15% from 25%. Hong Kong-listed shares of property companies surged in response to the stimulus.
Revised offer for Boeing workers Amid a strike by Boeing workers, the company revised its contract offer, raising wages by 30% over four years, up from 25% it proposed earlier. Boeing reinstated annual bonuses and doubled a contract ratification bonus to $6,000 from $3,000. The labor union said Monday it is reviewing the offer.
[PRO] Tech for Big Tech The rising tide of artificial intelligence is lifting related stocks. Specialized chips, data centers and electricity are needed to power the AI boom. Companies in those sectors have seen their stocks rise. The next to benefit from AI, according to Japanese bank Nomura, is the industry specializing in cooling of data centers.
In an interview with CNBC, Minneapolis Fed President Neel Kashkari said, “We still have a strong, healthy labor market. But I want to keep it a strong, healthy labor market.” Kashkari’s emphasis on the strength of the jobs market suggests the Fed wants to reinforce the narrative that the economy’s not staring at a recession.
Atlanta Fed President Raphael Bostic was more circumspect. “Progress on inflation and the cooling of the labor market have emerged much more quickly than I imagined at the beginning of the summer,” he said at a separate event.
That Bostic was possibly surprised by the increase in the unemployment rate is an indication some Fed officials are indeed worried the jobs market isn’t as strong as it should be.
Last, in remarks to the National Association of State Treasurers, Chicago Fed President Austan Goolsbee said that “it’s appropriate to increase our focus on the other side of the Fed’s mandate — to think about risks to employment, too, not just inflation.”
Goolsbee sees “many more rate cuts over the next year” because the state of employment is a “through line on economic conditions.” That suggests economic conditions need the support of additional cuts.
Still, yesterday’s Fedspeak was sufficiently vague and didn’t seem to cause alarm.
Major U.S. indexes ticked up. The S&P rose 0.28%, the Dow advanced 0.15% and the Nasdaq Composite climbed 0.14%. While those increases appear small, they pushed the S&P and Dow to new closing highs.
The narrative the central bank has been on top of its game to ensure a soft landing, then, is very much intact.
– CNBC’s Jeff Cox, Brian Evans and Alex Harring contributed to this story.
The sun rises behind the skyline of lower Manhattan and One World Trade Center on September 14, 2024, in Jersey City, New Jersey.
Gary Hershorn | Corbis News | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Intel forges new path for foundry Intel shares popped around 8% in extended trading on news the chipmaker plans to structure its foundry business as an independent unit with its own board and ability to raise outside funding. It might even spin off the business as a public company, according to a person with knowledge of the matter. Separately, the Biden administration on Monday awarded Intel up to $3 billion under the CHIPS Act.
Blemished Apple Apple shares slid 2.78% after TF Securities analyst Ming-Chi Kuo reporteddemand for Apple’s new iPhone 16 was down 12% year on year compared with the iPhone 15’s first-weekend sales. Kuo also said consumers weren’t enthused because Apple Intelligence wasn’t available with the iPhone at launch, and as competition from Chinese manufacturers dents iPhone demand.
[PRO] Short-lived record? The S&P 500 is less than 1% away from its record high set in July. The upcoming Federal Open Market Committee meeting, at which the U.S. Federal Reserve is expected to cut interest rates by at least 25 basis points, might lift the S&P to new heights. But analysts warn the new high might be short lived.
Technology stocks benefit the most from low interest rates, conventional market wisdom says.
That’s because tech companies tend to promise future profit in exchange for present money. When rates are low, that proposition appears attractive because returns are low elsewhere. But when rates are high, those promises don’t seem as attractive as less risky returns from assets such as Treasurys.
The past two years have demolished this narrative. Tech has soared even as interest rates have been at 23-year highs, thanks to enthusiasm over artificial intelligence’s promise of new and explosive revenue streams.
Nvidia, the lynchpin of AI, has soared nearly 136% just this year. Meta, which has its own AI model named Llama, is up about 51%.
With the market pricing in a 62% chance — up from 30% last week — that the U.S. Federal Reserve will make a larger-than-usual cut of 50 basis points, according to the CME FedWatch Tool, it stands to reason tech will pop further.
The sector, however, has been rocky in recent weeks. The VanEck Semiconductor ETF, for instance, fell 1.31% Monday, while Nvidia slipped 1.95%.
This implies investors have been moving out of tech to other sectors that might experience tailwinds amid lower rates. Case in point: the financial and energy sectors rose more than 1% on Monday, performing better than the broader market.
Goldman Sachs noted hedge funds’ weekly purchases last week of financial stocks were the highest since June 2023.
“Other areas of the market are starting to perk up, and a lot of that has to do with the future rate cuts that are coming into play,” said Christopher Barto, senior investment analyst at Fort Pitt Capital.
That doesn’t mean tech’s out of favor. It’s likely to continue driving the market. But other sectors might show up for the ride.
– CNBC’s Hakyung Kim, Pia Singh and Yun Li contributed to this story.
A pilot performs a walkaround before a United Airlines flight
Leslie Josephs/CNBC
U.S. passenger airlines have added nearly 194,000 jobs since 2021 as companies went on a hiring spree after spending months in a pandemic slump, according to the U.S. Department of Transportation. Now the industry is cooling its hiring.
Airlines are close to their staffing needs but the slowdown is also coming in part because they’re facing a slew of challenges.
Annual pay for a three-year first officer on midsized equipment at U.S. airlines averaged $170,586 in March, up from $135,896 in 2019, according to Kit Darby, an aviation consultant who specializes in pilot pay.
Since 2019, costs at U.S. carriers have climbed by double-digit percentages. Stripping out fuel and net interest expenses, they’ll be up about 20% at American Airlines this year and around 28% higher at both United Airlines and Delta Air Lines from 2019, according to Raymond James airline analyst Savanthi Syth.
It is more pronounced at low-cost airlines. Southwest Airlines‘ costs will likely be up 32%, JetBlue Airways‘ up nearly 35% and Spirit Airlines will see a rise of almost 39% over the same period, estimated Syth, whose data is adjusted for flight length.
Friday’s U.S. jobs report showed air transportation employment in August roughly in line with July’s.
But there have been pullbacks. In the most severe case, Spirit Airlines furloughed 186 pilots this month, their union said Sunday, as the carrier’s losses have grown in the wake of a failed acquisition by JetBlue Airways, a Pratt & Whitneyengine recall and an oversupplied U.S. market. Last year, even before the merger fell apart, it offered staff buyouts.
Other airlines are easing hiring or finding other ways to cut costs.
Frontier Airlines is still hiring pilots but said it will offer voluntary leaves of absence in September and October, when demand generally dips after the summer holidays but before Thanksgiving and winter breaks. A spokeswoman for the carrier said it offers those leaves “periodically” for “when our staffing levels exceed our planned flight schedules.”
Southwest Airlines expects to end the year with 2,000 fewer employees compared with 2023 and earlier this year said it would halt hiring classes for work groups including pilots and flight attendants. CFO Tammy Romo said on an earnings call in July that the company’s headcount would likely be down again in 2025 as attrition levels exceed the Dallas-based carrier’s “controlled hiring levels.”
United Airlines, which paused pilot hiring in May and June, citing late-arriving planes from Boeing, said it plans to add 10,000 people this year, down from 15,000 in each 2022 and 2023. It plans to hire 1,600 pilots, down from more than 2,300 last year.
It’s a departure from the previous years when airlines couldn’t hire employees fast enough. U.S. airlines are usually adding pilots constantly since they are required to retire at age 65 by federal law.
Airlines shed tens of thousands of employees in 2020 to try to stem record losses. Packages of more than $50 billion in taxpayer aid that were passed to get the industry through its worst-ever crisis prohibited layoffs, but many employees took carriers up on their repeated offers of buyouts and voluntary leaves.
Then, travel demand snapped back faster than expected, climbing in earnest in 2022 and leaving airlines without experienced employees like customer service agents. It also led to the worst pilot shortage in recent memory.
In response, companies — especially regional carriers — offered big bonuses to attract pilots.
But times have changed. Even air freight giants were competing for pilots in recent years but demand has waned as FedEx and UPS look to cut costs.
American Airlines CEO Robert Isom said in an investor presentation in March that the carrier added about 2,300 pilots last year and that it expects to hire about 1,300 this year.
“We will be hiring for the foreseeable future at levels like that,” he said at the time.
Despite the lower targets, students continue to fill classrooms and cockpits to train and build up hours to become pilots, said Ken Byrnes, chairman of the flight department at Embry-Riddle Aeronautical University.
“Demand for travel is still there,” he said. “I don’t see a long-term slowdown.”
The Dow Jones Industrial Average rose about 3.8% in the first six months of the year, lagging way behind the Nasdaq, up 18.1%, and the S&P 500, which jumped 14.5% — as investors plowed into artificial intelligence-related stocks.
Brendan Mcdermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Boeing ‘guilty plea’ U.S. prosecutors plan to seek a guilty plea from Boeing over a charge related to two fatal 737 Max crashes in 2018 and 2019, attorneys for the victims’ family members said. The Justice Department is reviewing whether Boeing violated a 2021 settlement that shielded the company from federal charges. Boeing agreed then to pay a $2.5 billion penalty for a conspiracy charge tied to the crashes. The DOJ revisited the agreement after a door panel blew out of a new 737 Max 9 in January, sparking a new safety crisis.
Under fire Nike CEO John Donahoe faces growing discontent as the company’s stock plummeted 20% on Friday, its worst day since 1980, after forecasting a significant decline in sales. As Wall Street digested the dismal outlook from the world’s largest sportswear company, at least six investment banks downgraded Nike’s stock. Analysts at Morgan Stanley and Stifel took it a step further, specifically calling the company’s management into question.
Bitcoin windfall Mt. Gox, a bankrupt Japanese bitcoin exchange, is set to repay creditors nearly $9 billion worth of Bitcoin following a 2011 hack. The court-appointed trustee overseeing the exchange’s bankruptcy proceedings said distributions to the firm’s roughly 20,000 creditors would begin this month. The payout is likely to be a windfall for those who waited a decade, with Bitcoin’s value surging from around $600 in 2014 to over $60,000 today. One claimant, Gregory Greene, could potentially receive $2.5 million for his $25,000 investment.
Inflation cooling A key inflation measure, watched closely by the Federal Reserve, slowed to its lowest annual rate in over three years in May, with the core personal consumption expenditures price index rising 2.6% from a year ago. “This is just additional news that monetary policy is working, inflation is gradually cooling,” San Francisco Fed President Mary Daly told CNBC’s Andrew Ross Sorkin during a “Squawk Box” interview. “That’s a relief for businesses and households who have been struggling with persistently high inflation. It’s good news for how policy is working.”
[PRO] Rally will broaden The tech sector has driven market performance in 2024, with the S&P 500 tech group up 28% and Nvidia soaring 149%, while small-caps have lagged. Oppenheimer’s chief market strategist John Stoltzfus believes the rally will broaden. CNBC’s Lisa Kailai Han looks at the reasons behind his call.
It's a busy political environment for markets to navigate. Wall Street has shown remarkable resilience thanks to the AI-powered rally in the first half of the year, which has seen the Nasdaq soar 18% so far. Nvidia is up almost 150%. There could be more to come; Bank of America believes Nvidia and Apple could still deliver "superior returns."
John Donahoe was brought in from eBay to transform the athletic apparel giant's digital channels. The company ditched its retail partners, became too dependent on its aging sneaker ranges and lost ground to new contenders Hoka and On. It'll certainly make an interesting case study for MBA programs for all the wrong reasons. As Wall Street questioned Donahoe's position, he still had the approval of its founder.
Friday also saw the Fed's favored inflation measure come in line with expectations, raising the prospect of interest rate cuts later this year.
"I really think the Fed should tee up a cut at the July 31 meeting, confirm it at Jackson Hole in August and do it in September," Wharton finance professor Jeremy Siegel told CNBC's "Squawk on the Street." He added that one or maybe one-and-a-half rate cuts have already been priced in.
"I actually think there will be more because there might be a little bit more softness in the economy and better inflation numbers, both of those feeding better rates," he continued. Siegel also said it is "hard to say" where the bull market's trajectory currently stands.
In a four-day trading week — markets are closed for the July 4 Independence Day holiday — the big economic number to watch is the June jobless data on Friday. CNBC's Sarah Min has more on what to expect.
— CNBC's Lisa Kailai Han, Yun Li, Jeff Cox, Leslie Josephs, Gabrielle Fonrouge, Hakyung Kim, Brian Evans, Spencer Kimball, Ryan Browne and MacKenzie Sigalos contributed to this report.
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Boeing aims to launch its first Starliner flight with astronauts on Wednesday, in the latest attempt to fly the long-delayed spacecraft.
The launch is scheduled for 10:52 a.m. ET from Cape Canaveral, Florida. Two NASA astronauts will be aboard the Starliner capsule, which will be carried by United Launch Alliance’s Atlas V rocket to the International Space Station.
Wednesday is the latest in a series of attempts to launch the mission, which is known as the Boeing crew flight test. On Saturday, a launch attempt was called off in the final minutes of the countdown due to a problem with one of the computer’s that provides ground support to the rocket. In early May, another attempt was called off due to an issue detected with the rocket itself.
If the launch is postponed again, Boeing has a backup opportunity scheduled for Thursday.
United Launch Alliance – or ULA, a joint venture of Boeing and Lockheed Martin – replaced the rocket’s problematic valve after the May attempt and replaced a faulty part in the ground infrastructure computer after Saturday’s attempt.
The United Launch Alliance (ULA) Atlas V rocket with Boeing’s CST-100 Starliner spacecraft sits to Space Launch Complex 41 at the Kennedy Space Center in Cape Canaveral, Florida on June 3, 2024.
NASA astronauts Butch Wilmore, left, and Suni Williams.
Credit: Kim Shiflett | NASA
Butch Wilmore and Suni Williams are flying on Starliner, with the former serving as the spacecraft’s commander and the latter as its pilot.
Wilmore joined NASA in 2000 and has flown to space twice previously on the Space Shuttle and Russia’s Soyuz. Before NASA, Wilmore was a U.S. Navy pilot.
Williams was selected by NASA in 1998 and has also flown to space twice before, on the Space Shuttle and then the Soyuz. Williams was also a Navy pilot, like Wilmore, before joining the space agency.
Boeing’s Starliner spacecraft atop the United Launch Alliance Atlas V rocket is seen on the launch pad of Space Launch Complex-41 at Cape Canaveral Space Force Station in Florida on Thursday, May 30, 2024.
Isaac Watson | NASA
Starliner launches on ULA’s Atlas V. The rocket debuted in 2002, and the Starliner crew flight test represents its 100th launch.
The capsule itself is built to carry as many as four NASA astronauts per flight and more than 200 pounds of research and cargo. The spacecraft lands using a parachute and airbag system. Starliner is reusable, with each capsule designed to fly as many as 10 missions.
Boeing’s crew flight test aims to certify the Starliner system as capable of carrying NASA astronauts to and from the ISS.
If Starliner launches on Wednesday, it will fly in space for about 25 hours before a planned docking with the International Space Station at 12:15 p.m. on Thursday. The astronauts will then spend about a week on the ISS, focused on testing Starliner, before returning to Earth.
U.S. Secretary of Transportation Pete Buttigieg speaks during a press briefing the day after the collapse of the Francis Scott Key Bridge in Baltimore, at the White House in Washington, U.S., March 27, 2024.
Elizabeth Frantz | Reuters
Transportation Secretary Pete Buttigieg says that climate change is one of the culprits behind an increase in flight turbulence.
“The reality is, the effects of climate change are already upon us in terms of our transportation,” Buttigieg said on CBS’ “Face the Nation” on Sunday, forecasting that turbulence is something that will continue to “affect American travelers, whether here or abroad.”
“We’ve seen that in the form of everything from heat waves that shouldn’t statistically even be possible threatening to melt the cables of transit systems in the Pacific Northwest, to, as you mentioned, hurricane seasons becoming more and more extreme and indications that turbulence is up by about 15%,” he continued. “That means assessing anything and everything that we can do about it.”
A study published in the journal Geophysical Research Letters last year found that there have been increases in clear-air turbulence (CAT) between 1979 and 2020, with “severe-or-greater” turbulence – the strongest category of CAT – becoming 55% more frequent over the North Atlantic over the course of that time period.
“Our climate is evolving,” Buttigieg said. “Our policies and our technology and our infrastructure have to evolve accordingly, too.”
His comments come as turbulence has wreaked havoc on a number of flights so far this year.
On Sunday, 12 people became injured after a Qatar Airways flight from Doha to Dublin was hit with turbulence while flying over Turkey. Six passengers and six crew members were injured, eight of whom were taken to the hospital after assessment, Dublin Airport said in a post on X.
The aircraft landed just before 1:00 p.m. local time and was met by emergency services – including airport police and the fire and rescue department – upon landing, the airport said in a separate post on X.
Severe turbulence also struck a Singapore Airlines flight last week, resulting in the death of one person and leaving 30 others injured.
While Buttigieg called the deadly turbulence on the Singapore Airlines flight “very rare,” he added that “turbulence can happen and sometimes it can happen unexpectedly.”
“Now, there are protocols and patterns for things like how pilots who encounter turbulence can notify those who might be coming in the path,” he said. “But I do think we need to continually re-evaluate that in the face of the reality that these things are more frequent and more severe than before.”
Boeing revealed on Friday that it’s seen a 500% increase in the number of employee submissions about quality and safety concerns during the first two months of 2024 compared to the same period a year ago.
The aerospace giant noted that the rise in submissions occurred after a section of an Alaska Airlines 737 Max 9 plane blew out midflight on January 5. The company said this increase is “a sign of progress toward a robust reporting culture.”
When asked about Boeing’s findings, Buttigieg backed up that claim, saying it’s “encouraging” to see that aviation employees are fostering a culture of “if you see something, say something.”
“We want you to err on the side of reporting,” he said. “The concerning part, of course, is that any of those issues are happening at all.”
Boeing leaders are set to meet with the Federal Aviation Administration on Thursday to present its plan on improving quality control. The agency announced in late February that it gave the company 90 days to develop the plan.
A man shops for fruit at a grocery store on February 01, 2023 in New York City.
Leonardo Munoz | Corbis News | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Stocks rally Wall Street closed higher on Tuesday with the S&P 500 hitting a fresh record, up 1.1%. The blue-chip Dow gained over 200 points, while the Nasdaq added 1.5% as U.S. inflation data came in mildly higher than expected in February.
Record shareholder payouts Shareholder payouts hit a record $1.7 trillion last year, according to a new report by British asset manager Janus Henderson. Nearly half of the world’s total dividend growth came from the banking sector, which delivered record payouts as rising borrowing costs lifted lenders’ margins, the report found.
Boeing crisis hurt airlines CEOs from several airlines say Boeing’s delivery delays have forced the carriers to change their growth plans. Boeing’s crisis has deepened since a door plug blew out midflight from an Alaska Airlines Max 9 in January. Southwest Airlines, Alaska Airlines and United, are some of the top buyers of Boeing’s aircraft that have been impacted by its problems.
Citadel on rate cuts Inflation tailwinds remain and the Fed shouldn’t cut rates too quickly, says Citadel founder and CEO Ken Griffin. “If I’m them, I don’t want to cut too quickly,” he noted, adding that it will be “more devastating” if they have to change direction after initially cutting rates. “I think they are going to be a bit slower than what people were expecting two months ago in cutting rates.”
[PRO] Buy or sell Nivida? Nvidia’s stock has surged over 200% in 2023 alone, powered by the global AI frenzy. Is it time to take profit or should investors stay the course? Experts who currently hold the chip giant’s stock share their insights.
Still, core inflation — which excludes food and energy — was stronger than expected, up 0.4% last month, which reflects lingering stickiness in price pressures.
Investors don’t expect that latest data to move the needle on the Fed cutting rates in June. That could be why markets have had a more muted reaction to the news.
“We have the numbers we have and this wasn’t great news for the Fed but markets don’t see it as a big threat to rate cuts later in the year,” Kathy Jones, chief fixed income strategist at Charles Schwab, said on X.
Yet, the hot print poses a problem for the Fed and muddies the water for its deliberations on the coming rate cuts.
“The long-term disinflation trajectory probably has not changed, but the path to the Federal Reserve’s 2% target will be choppy,” noted LPL Financial chief economist Jeffrey Roach. “Expect to see markets struggle with what this means for Fed policy.”
There is a lot riding for Wall Street when the central bank meets next week. Investors’ main focus will be on whether the Fed will continue to pencil in three rates for this year or will officials decide to change course.
A trader works, as a screen displays a news conference by Federal Reserve Board Chairman Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024.
Brendan McDermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Wall Street retreats U.S. stocks lost ground on Monday and Treasury yields rose amid lingering concerns that the Federal Reserve may not cut rates as much as expected. The blue-chip Dow fell over 200 points. The S&P 500 also slumped after hitting a record high last week. The Nasdaq Composite also dropped 0.2%.
Oil’s supply crunch The oil market faces a supply crunch by the end of 2025 as the world is not replacing crude reserves fast enough, according to Occidental CEO Vicki Hollub. About 97% of the oil produced today was discovered in the 20th century, she told CNBC.
Palantir surges Shares of Palantir spiked 19%in extended trading after the company reported revenue that topped analysts’ estimates. In a letter to shareholders, Palantir CEO Alex Karp said demand for large language models in the U.S. “continues to be unrelenting.”
Red Sea tensions Higher shipping costs due to tensions in the Red Sea could hinder the global fight against inflation, said the Organisation for Economic Co-operation and Development. Clare Lombardelli, chief economist at the OECD, told CNBC that shipping-driven inflation pressures remain a risk rather than its base case.
[PRO] Banking allure The banking sector offers attractive opportunities despite an increase in volatility, according to fund manager Cole Smead. “It’s the banks that made bad decisions that are making [other] banks look attractive in pricing,” Smead told CNBC, who picked two bank stocks that are in play.
Investors are once again getting ahead of themselves on the Fed’s next move.
Markets were rattled after Federal Reserve Chair Jerome Powell reiterated the central bank is unlikely to rush to lower interest rates.
Wall Street has been parsing his hawkish comments, yet in essence what Powell said over the weekend was no different than what he shared at Wednesday’s press conference: that he wants to see more evidence that inflation is coming down to a sustainable level.
Still, the debate over the timing of rate cuts unsettled Fed watchers.
This sparked a sell-off spurred by higher bond yields. The yield on the 10-year Treasury spiked for a second day, trading around 4.163%. Typically, higher yields tend to indicate investors think the Fed will take longer to cut rates.
Fresh data out Monday also didn’t help. A new survey showed the U.S. services sector expand at a faster-than-expected clip in January.
This on top of the booming jobs report released Friday, fueled investor worries that rates may stay elevated for much longer.
Wall Street will now look ahead to the swath of Fed speakers this week. Perhaps they will shed more light on the path for rate cuts.
United Airlines Holdings Inc. on Tuesday said it was rethinking its longer-term plans for Boeing’s biggest 737 Max jet, the Max 10, after the government’s grounding of dozens of Max 9s this month raised questions over whether the aircraft maker could still deliver planes on time.
United UAL, +5.31%
Chief Executive Scott Kirby said during the airline’s earnings call on Tuesday that it wasn’t canceling its orders for the Max 10. But he said the airline was taking the jet “out of our internal plans.”
“We’ll be working on what that means exactly with Boeing,” he said. “But Boeing is not going to be able to meet their contractual deliveries on at least many of those airplanes.”
United, during the call, said that it had 277 Max 10 jets on order for the rest of the decade. Of the 107 jets set for delivery this year, 31 were Max 9s. But Chief Financial Officer Michael Leskinen said was “unrealistic” to expect those jets to arrive as currently planned.
“Look,” he said. “The reality is that with the with the Max grounding, this is the kind of straw that broke the camel’s back with believing that the Max 10 will deliver on the schedule we had hoped for.”
He added: “It’s a great aircraft. But we can’t count on it. So we’re working on alternate plans.”
The decision on the Max 10 marks the latest blow to Boeing’s BA, -1.60%
reputation, as safety concerns pile up after a panel tore off a 737 Max 9 jet flown by Alaska Airlines earlier this month.
The Federal Aviation Administration grounded 171 Boeing 737 Max 9s for inspections, leading to scores of flight cancellations for both United and Alaska ALK, +2.87%.
United, when it reported fourth-quarter results on Monday, said it expected to lose money in the first quarter, following the impact of those cancellations. Still, shares were up on Tuesday on United’s full-year profit forecast.
The FAA over the weekend also recommended that operators of Boeing’s 737-900ER planes “visually inspect mid-exit door plugs to ensure the door is properly secured.” Regulators around the world grounded the 737 Max in 2019 after two fatal crashes.
Meanwhile, Ben Minicucci, the chief executive of Alaska Airlines, in an interview with NBC News published Tuesday, said inspectors found loose bolts on “many” of its Boeing 737 Max 9s after the mid-flight blowout.
“I’m more than frustrated and disappointed,” he said in that interview. “I am angry. This happened to Alaska Airlines. It happened to our guests and happened to our people. And my demand on Boeing is, what are they going to do to improve their quality programs in-house?”
An Embraer E175LR passengers aircraft of American Eagles airlines (C) taxxing before take-off to Pittsburg is seen at La Guardia Airport on January 9, 2024.
Charly Triballeau | Afp | Getty Images
Airlines canceled about 2,000 U.S. flights Friday as they grapple with winter weather and the grounding of Boeing 737 Max 9 planes.
Storms in the Midwest helped drive more than 4,500 delays, with major disruptions around Chicago and Detroit, major hubs for the largest U.S. carriers, according to flight-tracker FlightAware.
About 40% of flights at Chicago’s O’Hare International Airport, a hub for United Airlines and American Airlines, were canceled after a snowstorm led to an over two-hour ground stop. Detroit Metropolitan Wayne County Airport, a hub for Delta Air Lines, had about 20% of flights Friday either delayed or canceled due to the storms.
Southwest Airlines, which has a big operation out of Chicago Midway, canceled more than 400 flights, while more than 900 were delayed.
United canceled about 10% of its mainline flights and delayed about 20%.
Last week, the Federal Aviation Administration grounded Boeing 737 Max 9s after a door plug blew off an Alaska Airlines flight, so the jets can undergo inspections. That grounding has continued to disrupt travel for both United and Alaska Airlines, the only two U.S. airlines that operate the aircraft.
Alaska Airlines said Friday it would cancel all flights on the Max 9 through Sunday as it waits for documentation from Boeing and the FAA to begin inspections.
About 20% of the carrier’s flights were canceled Friday and more than 10% were delayed, FlightAware data showed. Alaska said that between 110 and 150 flights per day would be impacted by the grounding of the Max 9.
“We regret the significant disruption that has been caused for our guests by cancellations due to these aircraft being out of service,” the company said.
U.S. stock indexes were edging higher on Wednesday with technology stocks looking to extend gains ahead of the December inflation report, which is expected to shed more direct light on when the Federal Reserve could dial back its two-year-long effort to tighten monetary policy and cool the economy.
The Dow Jones Industrial Average DJIA
was up 38 points, or 0.1%, to 37,562
The Nasdaq Composite COMP
gained 43 points, or 0.3%, to 14,901.
On Tuesday, the Dow industrials fell 0.4%, to 37,525, while the S&P 500 declined 0.2%, to 4,757, and the Nasdaq Composite gained less than 0.1%, to 14,858.
What’s driving markets
Inflation and its impact on bond markets and the Federal Reserve’s monetary-policy trajectory are the primary focus for markets this week as investors remain on hold ahead of Thursday’s December inflation reading and high-profile corporate earnings reports on Friday, when some of the big banks will kick off the fourth-quarter 2023 earnings season.
The S&P 500 sits less than 0.7% shy of its record high of 4796.6 touched a little over two years ago, after rallying strongly in the last few months primarily on hopes that easing inflation will allow the Fed to lower interest rates sooner and faster than the markets previously anticipated.
The yield on the 10-year Treasury BX:TMUBMUSD10Y,
the benchmark for borrowing costs, has fallen from 5% in October to 4.014% on Wednesday.
But for this bullish narrative to play out, inflation must be seen continuing to fall back to the central bank’s 2% target. That’s why great importance is therefore being placed on the consumer-price index for December, which will be published at 8:30 a.m. Eastern on Thursday.
Economists forecast that annual headline CPI inflation inched up to 3.2% last month from 3.1% in November. The core reading, which strips out more volatile items like food and energy, is expected to fall from 4% to 3.8%.
Adam Phillips, director of portfolio strategy at EP Wealth Advisors, said the CPI report may give investors enough confidence that the disinflation is likely to continue, even if the price levels are “still a very long way from anything that is considered healthy.”
However, he cautioned that the economy has “certain factors” that are beyond the Fed’s control, such as the volatility in supply chains and growing geopolitical risks, as well as a potential resurgence in inflation, he told MarketWatch via phone on Wednesday.
“[E]quities have remained broadly range-bound since just before Christmas, with little to push them in either direction,” said Jim Reid, strategist at Deutsche Bank.
“That might change soon, since we’ve got the U.S. CPI print tomorrow, and then the start of earnings season on Friday, but for now at least, there’s been few headlines for investors to latch onto, just a bit of indigestion after over exuberance before New Year left markets with a little bit of an extended hangover,” Reid added.
In U.S. economic data, the wholesale inventories declined 0.2% in November, in line with Wall Street expectations, as manufacturers continue to juggle with a fragile economy, according to the Commerce Department.
New York Fed President John Williams will speak in White Plains, N.Y., at 3:15 p.m. Eastern time.
Companies in focus
Shares of Boeing Co. BA, +1.53%
edged up 1.5% on Wednesday after chief executive David Calhoun on Tuesday told employees the jet maker needed to acknowledge its mistakes after a panel blew off a 737 Max 9 jet flown by Alaska Airlines days earlier, and approach the matter with “complete transparency.” Shares have fallen nearly 8% this week.
Alaska Airlines, United Airlines and Turkish Airlines have all grounded their Boeing 737 Max 9 airplanes after part of one such jet tore away during an Alaska Airlines flight on Friday. But despite the potential safety risks for travelers and further damage to Boeing’s BA, -8.03%
reputation, some Wall Street analysts, for now, have downplayed the financial impact for the jet maker.
In part, they pointed to the company’s status as one of two major players in aircraft production — the other being Airbus EADSY, +3.52%.
They also cited a tighter supply of available aircraft and limited near-term impact, at least while investigators try to figure out the cause of the incident.
Those airlines and others took the action over the weekend after a panel on a jet blew out about 10 minutes into Alaska Airlines Flight 1282 at an altitude of about 16,000 feet.
No one died in the incident. But the Federal Aviation Administration ordered the temporary grounding of certain Boeing 737 Max 9 aircraft. The order covered 171 planes.
Still, some Wall Street analysts on Monday said to buy the stock anyway. They said the latest difficulties with the aircraft — which follow the 2019 grounding of Max jets by many nations following two fatal crashes — were unlikely to have a big near-term financial impact.
BofA analysts, in a research note dated Sunday, said that “at this point in time, due to the duopoly nature of the industry, we do not see this impacting orders for any of the 737 MAX variants. However, if the hits to the program do keep coming … at some point, the flying public may lose confidence in the 737 MAX which could ultimately impact sales.”
The analysts said it wasn’t clear yet whether the blowout on Friday was due to an assembly mistake at Boeing, an improper installation from fuselage maker Spirit AeroSystems or oversight issues elsewhere. But they noted that the aircraft was relatively new, having been delivered on Oct. 31. And they said that “some scrutiny must be saved for regulators as well, as the FAA is ultimately responsible for certificating these aircraft before delivery.”
Spirit AeroSystems’ stock SPR, -11.13%
was down 11%.
Analysts at William Blair also said they didn’t expect a big hit to Boeing’s financials.
“While the Alaska Airlines door plug accident was terrifying, we do not believe that it will have a major financial impact, unless another incident occurs after the aircraft returns to service,” they said in a note on Monday.
Analysts there estimated that over the past two months, the Max 9 made up less than one-fifth of Boeing’s total deliveries. They said those deliveries would only be “modestly impacted over the first quarter as it could take some time to determine the cause.”
Of the 23 analyst ratings on Boeing’s stock tracked by FactSet, 18 are buy ratings or the equivalent.
However, Morgan Stanley analyst Ravi Shanker said the 737 Max 9 issues will likely disrupt first-quarter results for United Airlines UAL, +2.78%
and Alaska Air ALK, -0.21%.
“This will hopefully be a situation resolved in days/weeks rather than months, but it will also serve as a reminder of how fragile airline capacity can be despite the overhang of capacity,” Shanker said in a Monday research note.
United Airlines’ stock rose 2.4% on Monday, while Alaska Air’s dipped by 0.3%.
Along with United Airlines, Alaska Airlines and Turkish Airlines, Copa Airlines and Aeromexico grounded about 40 Boeing 737 Max 9 planes, according to reports.
According to Deutsche Bank analysts, the affected fleet accounts for 16.1% of Alaska Airlines flights and 6.6% of United flights, although United has more 737 Max 9 aircraft than Alaska.
Other airlines with the plane in their fleet include Jet Airways of India with one plane, Jin Air of Korea with three, KLM Royal Dutch Airlines KLMR,
with five and Korean Air Lines 003490, -1.52%
with nine, according to Planespotter.net.
European regulators also grounded the 737 Max 9 for inspection.
Some major airlines do not have any 737 Max 9s in their fleets, including American Airlines AAL, +7.21%,
Southwest Airlines LUV, -0.10%
and Air Canada AC, +3.42%,
according to reports.
