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Open Interest Changes
Fasten your seat belt
A weekend plane accident that could have ended in tragedy continues to make waves, putting a spotlight on the aerospace industry and what it might mean for one of America's leading exporters. A so-called door plug on Alaska Airlines (ALK) Flight 1282 blew out on Friday evening, causing the cabin aboard the Boeing (BA) 737 Max 9 to rapidly depressurize only 6 minutes after it departed from the Portland International Airport. Luckily, the jetliner was cruising at an altitude of 16,000 feet at the time of the incident, and no one was sitting in the two seats next to the affected area, though things could have ended a lot differently if the plane had been flying much higher.
Clues: A probe is underway to examine the door plug, a panel where an optional emergency exit can be placed if a plane is manufactured with a high-capacity seating configuration. All of Alaska Airlines' aircraft are permanently "plugged," leading many to speculate that something may have been wrong with the installation of bolts or the pressurization system aboard the plane. In response to the accident, the FAA temporarily grounded 171 Boeing 737 Max 9 planes worldwide, requiring fresh inspections and safety checks before the plane variant returns to service. The missing door plug was also located in the backyard of a Portland, Oregon-area resident.
It's bad news for Boeing (BA) shareholders as the stock opened the premarket session on Monday down 9% to $226. Aerospace supplier Spirit AeroSystems (SPR), which manufactures and installs the door plugs in question, also tumbled over 20% in early trade to $25/share, with both companies involved in the complex, two-tier installation process. SA Investing Group Leader Dhierin Bechai believes the latest investigation will solely focus on the 737 MAX 9 (with deactivated doors) of which Boeing has around 300 in backlog by November 2023 and over 200 airplanes delivered.
Outlook: The entire situation could not have come at a worse time for Boeing. The stock was just recovering from lows last seen during COVID as the U.S. planemaker attempted to ramp up output and take back the delivery crown from Airbus (OTCPK:EADSY). Its French rival has held the top spot ever since the grounding of the Boeing 737 MAX in 2018, which was in response to two jetliner crashes that had killed 346 people. Since then, it has been hard for Boeing to shake off financial and reputational damage, and the latest episode will likely put the company back in the crosshairs of regulators. (20 comments)
Top Congressional leaders have reached a $1.59T bipartisan federal spending deal for the current fiscal year, significantly reducing the odds of a government shutdown next week. House Speaker Mike Johnson said the deal would secure $16B in additional spending cuts, with the top-line figure including $886B for defense and $704B for non-defense spending. However, there appears to be some discord on the numbers discussed in the agreement. While President Biden hailed the bipartisan deal, Republicans have been more critical, with the House Freedom Caucus calling it a "total failure." (5 comments)
Supply and demand
While oil prices ended last week on a high note, they turned red on Monday as Saudi Arabia (ARMCO) cut the February selling price of its flagship Arab Light crude to Asian customers amid rising supply, growing competition from rival suppliers and demand concerns. Meanwhile, U.S. oil production is now near record levels, with weekly exports at a fresh high as the Red Sea crisis and the resulting run-up in costs for diverting tankers have driven up demand for cheaper American crude. Traders are also closely watching the U.S. government's oil purchases to replenish the strategic petroleum reserve, which may help in capping oil’s slide. (4 comments)
Buckling under plunging advertising sales, troubled radio and audio-streaming giant Audacy (OTCPK:AUDA) has filed for Chapter 11 bankruptcy protection. A restructuring plan would slash its debt from $1.9B to around $350M, while Audacy secured $57M in DIP financing, which along with its available cash and reserves, will enable it to fulfill commitments to staff, advertisers and partners. "The perfect storm of sustained macroeconomic challenges over the past four years facing the traditional advertising market has led to a sharp reduction of several billion dollars in cumulative radio ad spending," CEO David Field declared. Audacy shares, which were delisted from NYSE in November and now trade on the Pink Sheets, have dropped 97% over the past year.
In Asia, Japan closed. Hong Kong -1.9%. China -1.4%. India -0.9%.
In Europe, at midday, London -0.3%. Paris flat. Frankfurt +0.2%.
Futures at 7:00, Dow -0.4%. S&P -0.1%. Nasdaq flat. Crude -2.9% to $71.71. Gold -1.1% to $2,027.20. Bitcoin +2% to $44,924.
Ten-year Treasury Yield unchanged at 4.05%.
Today's Economic Calendar
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