What’s News in Markets: Southwest Cuts, Discount Trouble, CEO’s Return
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Hey, listeners. It's Saturday, March 16th. I'm Francesca Fontana for The Wall Street Journal, and this is What's News in Markets, our look at the biggest stock moves of the week and the news that drove them. Let's get to it. Happy almost St. Patrick's Day, everybody. I don't own anything green to wear, so maybe I'm lacking some of the holiday spirit. Apologies. The major stock indexes, too, though, were not showing much enthusiasm for green. The S&P 500, for instance, closed in the red more days than not this week. But there was one day that three major indexes managed to close in the green. That was Tuesday, when February's inflation reading seemed to affirm expectations for the Fed to wait until later this year to start cutting rates.
And the S&P 500 notched its 17th record close of 2024. Let's talk about Southwest.
What was the market backdrop and weekly performance for the S&P 500 this week?
But to talk about Southwest, we got to talk about Boeing first. As you heard on What's News this week, the planemaker has slowed down production due to increased scrutiny over its quality controls and safety issues. And this is now a big problem for airlines like Southwest. On Tuesday, the company said it's cutting its flight capacity and reevaluating its financial guidance partially due to these delayed deliveries from Boeing. And it's not the only airline being affected by this, but Southwest also reported weaker demand for leisure travel early this year, adding more bad news to the mix. Southwest shares dropped 15 percent on Tuesday, making it the worst performer in the S&P 500. And the stock didn't regain much ground the rest of the week.
And if we zoom out and look at the last few years, Southwest has had a bit of a rough go of it. There was, of course, the pandemic, and then the infamous meltdown of winter 2022 with thousands of flight cancellations. And then last year, around the same time, it was hit with that giant $140 million penalty from said meltdown. And now this. So let's put that 15% drop into perspective. Tuesday's decline was the stock's largest percent decrease since March of 2020. So yeah, this Boeing stuff is not doing Southwest's stock any favors. So we've all been feeling the relentless rise in cost of living, right? The grocery store sticker shock. So many of us who are trying to stretch our budget have probably looked to discount chains like Dollar Tree.
What's news, listeners? The name might ring a bell. Dollar Tree, if you don't know, operates its namesake stores as well as the family dollar chain, all catering to low-income shoppers. On Wednesday, Dollar Tree said it's closing about 1,000 Family Dollar stores over the next few years as the company struggles with store theft and customers spending less thanks to all of this inflation. Now, there's an important distinction I want to make here. Dollar Tree stores are mostly in suburban locations and they sell more knickknacks and such, while Family Dollar stores are more concentrated in cities and they sell groceries and other essentials. So the Family Dollar stores that are closing are likely to be a vital resource in those areas.
especially as more people are going to the grocery store to save money instead of eating at restaurants. McDonald's talked about this exact trend on Wednesday. And Dollar Tree's rival, Dollar General, also mentioned the impact of inflation on its shoppers. But back to Dollar Tree. Its shares dropped 14% on Wednesday, and they didn't regain much ground later in the week. Investors were pretty underwhelmed with Under Armour this week. It's so bad, it's good. I can't help myself. On Wednesday, the sportswear company said that its founder, Kevin Plank, is returning as CEO. Under Armour has been struggling to find its footing in recent years. It had a really great ride of rapid growth under Plank until 2017, when its sales hit a wall.
How are Boeing production slowdowns influencing Southwest Airlines' capacity and guidance?
And since then, the company's been struggling with excess inventory, supply chain issues, etc., So Plank is back after leaving in 2019. How did investors react? Like I said, they were underwhelmed. Under Armour shares lost 11% on Thursday and kept moving lower Friday.
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Chapters
3 chaptersSpeakers
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