A plane suffers a blowout of its fuselage midflight

Boeing faces new scrutiny about the safety of its best-selling plane after federal officials announced the temporary grounding of some Boeing 737 Max planes on Saturday, following a harrowing flight in which an Alaska Airlines jetliner was left with a gaping hole in its side.


The Federal Aviation Administration said it was requiring immediate inspections of Max 9 planes operated by U.S. airlines or flown in the United States by foreign carriers.

The FAA’s emergency order, which it said will affect about 171 planes worldwide, is the latest blow to Boeing over the Max lineup of jets, which were involved in two deadly crashes shortly after their debut.

On Friday, a window panel blew out on an Alaska Airlines Boeing 737 Max 9 seven minutes after takeoff from Portland, Oregon. The rapid loss of cabin pressure pulled the clothes off a child and caused oxygen masks to drop from the ceiling, but miraculously none of the 171 passengers and six members were injured. Pilots made a safe emergency landing.

Hours after the terrifying incident, Alaska Airlines announced that it would ground its entire fleet of 65 Max 9s for inspections and maintenance. CEO Ben Minicucci said Alaska expects the inspections to be completed “in the next few days.”

Alaska said on Saturday that it had completed inspecting more than one-fourth of its Max 9 fleet “with no concerning findings. Aircraft will return to service as their inspections are completed with our full confidence.”

Even the short grounding disrupted the airline — the Max 9 accounts for more than one-fourth of Alaska’s fleet — and its passengers. On Saturday, Alaska cancelled more than 100 flights, or 14% of its schedule, by late morning on the West Coast, according to FlightAware.

United Airlines said it had inspected 33 of its 79 Max 9s, and pulling the planes from service had caused about 60 cancelled flights.

Photos showed a hole in the Alaska jet where an emergency exit is installed when planes are configured to carry a maximum number of passengers. Alaska plugs those doors because its 737 Max 9 jets don’t have enough seats to trigger the requirement for another emergency exit.

The FAA and the National Transportation Safety Board said they would investigate Friday’s incident.

Boeing declined a request to make an executive available for comment. The company, based in Arlington, Virginia, issued a statement saying it supported the FAA’s decision to require immediate inspections. Boeing said it was providing technical help to the investigators.

Analysts said the extent of the damage to Boeing’s brand will depend on what investigators determine caused the blowout.

Richard Aboulafia, a longtime aerospace analyst and consultant, said if the blowout is traced to a manufacturing issue it would put more pressure on Boeing to change its processes, and cash-generating deliveries of new planes could be slowed.

Aboulafia said, however, he doesn’t expect any change in Boeing’s sales of the planes “unless the situation is worse than it seems.” Airlines are snapping up new, more fuel-efficient planes from Boeing and Airbus to meet strong demand for travel coming out of the pandemic.

The plane involved in Friday’s incident is brand-new — it began carrying passengers in November and has made only 145 flights, according to Flightradar24, a flight-tracking service.

The Max — the Max 8 and Max 9 differ mainly in size — is the newest version of Boeing’s venerable 737, a twin-engine, single-aisle plane frequently used on U.S. domestic flights.

More than a decade ago, Boeing considered designing and building an entirely new plane to replace the 737. But afraid of losing sales to European rival Airbus, which was marketing a more fuel-efficient version of its similarly sized A320, Boeing decided to take the shorter path of tweaking the 737 — and the Max was born.

A Max 8 jet operated by Lion Air crashed in Indonesia in 2018, and an Ethiopian Airlines Max 8 crashed in 2019. Regulators around the world grounded the planes for nearly two years while Boeing changed an automated flight control system implicated in the crashes.

Federal prosecutors and Congress questioned whether Boeing had cut corners in its rush to get the Max approved quickly, and with a minimum of training required for pilots. In 2021, Boeing settled a criminal investigation by agreeing to pay $2.5 billion, including a $244 million fine. The company blamed two relatively low-level employees for deceiving the Federal Aviation Administration about flaws in the flight-control system.


Robert Clifford, a Chicago lawyer who is representing families of passengers killed in the Ethiopian crash, said Friday’s incident raised questions of whether regulators were too quick to let Max planes return to flying. He accused Boeing of putting profits over safety.

“This is a company that went from being the gold standard in engineering expertise and precision to now a company that seems like it’s at the bottom of the barrel,” he said.

Boeing has estimated in financial reports that fallout from the two fatal crashes has cost it more than $20 billion. It has reached confidential settlements with most of the families of passengers who died in the crashes.

After a pause following the crashes, airlines resumed buying the Max. But the plane has been plagued by problems unrelated to Friday’s blowout.

Questions about components from suppliers have held up deliveries at times. Last year, the FAA told pilots to limit use of an anti-ice system on the Max in dry conditions because of concern that inlets around the engines could overheat and break away, possibly striking the plane. And in December, Boeing told airlines to inspect the planes for a possible loose bolt in the rudder-control system.


A passenger on a Southwest Airlines jet was killed in 2018 when a piece of engine housing blew off and shattered the window she was sitting next to. However, that incident involved an earlier version of the Boeing 737, not a Max.

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‘The high for equities is not in,’ says technical strategist who unpacks the stocks to buy now.

Siegel argues that bonds, which have been giving stocks the shove, have proven to be a terrible inflation hedge, but investors have forgotten that given it’s 40 years since the last big price shock. “Stocks are excellent long-term hedges, stocks do beautifully against inflation, bonds do not,” he told CNBC on Tuesday.

Don’t miss: ‘Bond math’ shows traders bold enough to bet on Treasurys could reap dazzling returns with little risk

Other stock cheerleaders out there are counting on a fourth-quarter rally, which, according to LPL Financial, delivers on average a 4.2% gain as portfolio managers snap up stock winners to spiff up performances.

Our call of the day from Evercore ISI’s head of technical strategy, Rich Ross, is in the bull camp as he declares the “high for equities is not in,” and suggests some stocks that will set investors up nicely for that.

Ross notes November is the best month for the S&P 500
Russell 2000
and semiconductors
while the November to January period has seen a 6% gain on average for the Nasdaq Composite
He says if the S&P can break out above 4,430, the next stop will be 4,630 within 2023, putting him at the bullish end of Wall Street forecasts.

In addition, even with 10-year Treasury yields back at their highs, the S&P 500 is still ahead this week and that’s a “great start” to any rally, he adds.


What else? He says “panic bottoms” seen in bond proxies, such as utilities via the Utilities Select Sector SPD exchange-traded fund ETF
real-estate investment trusts and staples, are “consistent with a bottom in bond prices,” which is closer than it appears if those proxies have indeed bottomed.


Among the other green shoots, Ross sees banks bottoming following Bank of America

earnings “just as they did in March of ’20 after a similar 52% decline which culminated in a year-end rally which commenced in Q4.”

He sees expanding breadth for stocks — more stocks rising than falling — adding that that’s a buy signal for the Russell 2000, retail via the SPDR S&P Retail ETF
and regional banks via the SPDR S&P Regional Banking

The technical strategist also says it’s time to buy transports
with airlines “at bear market lows and deeply oversold,” while railroads are also bottoming and truckers continue to rise.

As for tech, he’s a buyer of semiconductors noting they tend to gain 7% on average in November, and Nvidia

has been under pressure as of late. He also likes software such as Microsoft

and Palo Alto Networks


“The strong tech will stay strong and the weak will get strong,” says Ross.

The markets


are dropping, with bond yields

mixed. Oil prices


have pared a stronger rally after a deadly hospital explosion in Gaza City, with Iran reportedly calling for an oil embargo against Israel. Gold

has shot up $35.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

Morgan Stanley

posted a 10% earnings fall, but beat forecasts, with shares down. Abbott Labs

is up after upbeat results and aguidance hike and Procter & Gamble

is up after an earnings beat. Tesla

(preview here) and Netflix

(preview here) will report after the close.

Read: Ford CEO says Tesla, rival automakers loving the strike. He may be wrong

United Airlines shares

are down 5% after the airline lowered guidance due to the Israel/Gaza war. Spirit AeroSystems

surged 75% after the aircraft components maker announced a production support deal with Boeing

Housing starts came short of expectations, with the Fed’s Beige Book of economic conditions coming at 2 p.m. Also, Fed Gov. Chris Waller will speak at noon, followed by New York Fed Pres. John Williams at 12:30 p.m. and Fed Gov. Lisa Cook at 6:55 p.m.

China’s third-quarter GDP rose 4.9%, slowing from 6.3% in the previous quarter, but beating expectations.

Middle East tensions are ratcheting up with protests spreading across the region after a massive deadly blast at a Gaza City hospital, and airports evacuated across France over terror threats. President Biden told Israeli Prime Minister Benjamin Netanyahu that “it appears as though it was done by the other team.”

Read: Treasury says Hamas leaders ‘live in luxury’ as it unveils new sanctions

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Air traffic is booming again and environment activists aren’t happy

A strong rebound in air traffic reflects a healthy economic dynamic and a renewed ability for people to travel, it runs counter to ambitions to reduce CO2 emissions set out by public authorities.

Stalled during the pandemic, air traffic is booming again, the latest IATA report has confirmed. This trend seems to run counter to efforts to reduce greenhouse gas emissions, even though the sector has embraced the ecological transition.

In its latest report, the International Air Transport Association (IATA) forecasts 4.35 billion passengers this year, close to pre-pandemic record levels.

Air traffic has recovered from the Covid crisis

While the strong rebound in air traffic reflects a healthy economic dynamic and a renewed ability for people to travel freely, it also seems to run counter to ambitions to reduce CO2 emissions set out by public authorities in Europe and beyond.

Indeed, the sector is often singled out for its responsibility for global warming.

For Alexis Chailloux, low-carbon travel manager at Greenpeace France, this accelerated recovery is bad news: “We must remember that air travel is the mode of transport that is most harmful to the climate. In 2018, before Covid, air travel accounted for around six per cent of global warming, whereas it is taken by a minority of people. If you’re a senior executive, you’re going to take the plane 17 times more than if you’re a worker.”

The explosion in air traffic is mainly linked to leisure flights, with the rise in recent decades of low-cost airlines serving more and more European destinations at extremely low prices. In France, between 2008 and 2018, the number of flights for personal reasons doubled, while business flights remained stable, according to Greenpeace.

And this boom is set to continue, according to Jérôme Bouchard, an aeronautics expert with consultancy firm Oliver Wyman: “According to our studies, air traffic will increase by more than five per cent a year until the middle of the next decade. It’s up to the industry to find solutions to decarbonize so that we can keep flying while minimizing greenhouse gas emissions into the atmosphere.”

Measures deemed too timid to curb air traffic

But in general, associations and environmental NGOs point to the lack of ambitious structural measures to reduce air traffic-related CO2 emissions.

France, for example, issued a decree in May banning domestic flights when a train journey of less than 2.5 hours is possible. This measure is considered “anecdotal” by climate advocates, as it concerns only a handful of routes out of the hundred or so domestic connections.

At the European level, however, some initiatives are considered interesting. Amsterdam-Schiphol Airport, for example, has announced its intention to abolish night flights by the end of 2025 and to limit private jet flights, both to combat noise pollution and to help meet climate targets.

Inconsistent taxation

To further reduce traffic, environmental associations also recommend putting an end to tax breaks for air travel.

Alexis Chailloux points out the inconsistencies in the tax system: “French people who fly from Paris to Barcelona not only pay no VAT, but are also exempt from kerosene tax. If they make the same journey by train, they will pay an energy tax, in this case on electricity, and a passenger VAT. This double standard is quite incomprehensible, especially when you consider the climate impacts of air travel compared to rail.”

Greenpeace is also proposing a progressive tax that would target the most active travellers: “The idea is that the more you fly, the higher the tax will be, which would enable the effort to be weighted towards people who fly regularly and not on an individual who would like, for example, visit his family in the West Indies that he hasn’t seen for three years.”

Investing in railways

Developing the rail network is the other lever put forward by climate advocates.

“In Europe, major cities are not yet perfectly connected, neither by highspeed nor by night train. What’s more, because of Covid, some emblematic night lines, such as Paris-Venice or Hendaye-Lisbon, have disappeared,” laments Chailloux.

Others are in favour of more radical measures to cap air traffic, such as Jean-Marc Jancovici, president of The Shift project, who has proposed a quota of four flights per lifetime.

Finally, a trend that originated in Sweden, the flygskam or shame of flying, seems to be gradually making its way across the European continent, encouraging more and more travellers to turn away from airports and take the train instead.

Levers for greening the airline industry

Aware of its carbon footprint, the airline industry has embarked on a vast project to make the ecological transition and reduce its emissions. But the road ahead is long.

Jérôme Bouchard identifies several levers, starting with optimizing engine performance:

“A latest-generation A320 that leaves the Airbus factory today emits 20% less than the same A320 that left the same Airbus factory 20 years ago,” stresses the aeronautics expert from Oliver Wyman, who also points to other possible solutions in the immediate future, such as improved flight paths and better traffic management to avoid, for example, “planes waiting in the sky while turning over airports because it is saturated. “

The third lever, “the most important in terms of decarbonization over the next thirty years,” will be sustainable aviation fuel, in this case, synthetic fuels that are less polluting than kerosene, produced from non-fossil sources such as biomass, algae, agricultural or food waste.

Finally, the last lever, by 2035-2040: electric hybridization or hydrogen-powered aircraft.

“By combining these different levers, we’ll be virtually carbon neutral by 2050,” summarizes Jérôme Bouchard. “There will always be a portion of marginal emissions that we’ll have to manage to erase, thanks to direct air capture technologies, which involve taking carbon directly from the sky using huge hair dryers, and eventually recycling it as fuel for the aviation industry.”

A technological revolution that takes too long in the face of the climate emergency?

While Greenpeace applauds the industry’s efforts to decarbonize, it points out that this technological revolution is taking too long in the face of the climate emergency:

“The aircraft of the future is in the future, and for the moment it doesn’t exist. The only effective short-term lever for reducing emissions by 2030 is to reduce traffic”, explains Alexis Chailloux.

Jérôme Bouchard acknowledges that a large part of the current fleet is likely to be flying for a long time to come: “In 2050, we can consider that the vast majority of aircraft will still be based on technologies as we know them today and that the share of new hybrid, electric or hydrogen-powered aircraft will, while growing strongly, still be marginal in relation to current technologies.”

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Big bank earnings in spotlight following historic failures: ‘Every income statement line item is in flux’.

JPMorgan Chase & Co.
Citigroup Inc.

and Wells Fargo & Co.

— along with PNC Financial Services Group Inc.

and BlackRock Inc.

— report earnings Friday as Wall Street’s fixation on a recession continues to run deep. And following the implosion of Silicon Valley Bank
Signature Bank

and Silvergate Bank
along with efforts to seal up cracks in First Republic Bank

and Credit Suisse Group AG
Wall Street is likely to review quarterly numbers from the industry with a magnifying glass.

“Every income statement line item is in flux and the degree of confidence in our forecast is lower as the probability of a sharper slowdown increases,” Morgan Stanley analyst Betsy Graseck said in a note on Wednesday.

For more: Banks on the line for deposit flows and margin pressure as they reel from banking crisis

She said that the collapse of Silicon Valley Bank and Signature Bank last month would trigger an “accelerated bid” for customers’ money, potentially weighing on net interest margins, a profitability gauge measuring what banks make on interest from loans and what they pay out to depositors. Tighter lending standards, she said, would drive up net charge-offs — a measure of debt unlikely to be repaid — as borrowers run into more trouble obtaining or refinancing loans.

Phil Orlando, chief investment strategist at Federated Hermes, said in an interview that tighter lending standards could constrain lending volume. He also said that banks were likely to set aside more money to cover loans that go bad, as managers grow more conservative and try to gauge what exposure they have to different types of borrowers.

“To a significant degree, they have to say, what percentage of our companies are tech companies? What percentage are financial companies? Do we think that this starts to dribble into the auto industry?” he said. “Every bank is going to be different in terms of what their portfolio of business looks like.”

He also said that last month’s bank failures could spur more customers to open up multiple accounts at different banks, following bigger concerns about what would happen to the money in a bank account that exceeded the $250,000 limit covered by the FDIC. But as the recent banking disturbances trigger Lehman flashbacks, he said that the recent banking failures were the result of poor management and insufficient risk controls specific to those financial firms.

“COVID was something that affected everyone, universally, not just the banking companies but the entire economy, the entire stock market,” he said. “You go back to the global financial crisis in the ’07-’09 period, that’s something that really affected all of the financial service companies. I don’t think that’s what we’re dealing with here.”

Also read: Banking sector’s growing political might could blunt reform in wake of SVB failure, experts warn


Chief Executive Jamie Dimon has said that Trump-era banking deregulation didn’t cause those bank failures. But in his annual letter to shareholders last week, he also said that the current turmoil in the bank system is not over. However, he also said that the collapse or near-collapse of Silicon Valley Bank and its peers “are nothing like what occurred during the 2008 global financial crisis.”

“Regarding the current disruption in the U.S. banking system, most of the risks were hiding in plain sight,” Dimon said. “Interest rate exposure, the fair value of held-to-maturity (HTM) portfolios and the amount of SVB’s uninsured deposits were always known — both to regulators and the marketplace.”

“The unknown risk was that SVB’s over 35,000 corporate clients – and activity within them – were controlled by a small number of venture capital companies and moved their deposits in lockstep,” Dimon continued. “It is unlikely that any recent change in regulatory requirements would have made a difference in what followed.”

The Federal Reserve’s decision to raise interest rates, along with a broader pullback in digital demand following the first two years of the pandemic, stanched the flow of tech-industry funding into Silicon Valley bank and caused the value of its bond investments to fall.

Don’t miss: An earnings recession seems inevitable, but it might not last long

But the impact of those higher interest rates — an effort to slow the economy and, by extension, bring inflation down — will be felt elsewhere. First-quarter earnings are expected to decline 6.8% for S&P 500 index components overall, according to FactSet. That would be the first decline since the second quarter of 2020, when the pandemic had just begun to send the economy into a tailspin.

“In a word, earnings for the first quarter are going to be poor,” Orlando said.

This week in earnings

For the week ahead, 11 S&P 500

components, and two from the Dow Jones Industrial Average
will report first-quarter results. Outside of the banks, health-insurance giant UnitedHealth Group

reports during the week. Online fashion marketplace Rent the Runway Inc.

will also report.

The call to put on your calendar

Delta Air Lines Inc.: Delta

reports first-quarter results on Thursday, amid bigger questions about when, if ever, higher prices — including for airfares — might turn off travelers. The carrier last month stuck with its outlook for big first-quarter sales gains when compared with prepandemic levels. “If anyone’s looking for weakness, don’t look at Delta”, Chief Executive Ed Bastian said at a conference last month.

But rival United Airlines Holdings Inc.

has told investors to prepare for a surprise loss, even though it also reported a 15% jump in international bookings in March. And after Southwest Airlines Co.’s

flight-cancellation mayhem last year brought more attention to technology issues and airline understaffing, concerns have grown over whether the industry has enough air-traffic controllers, prompting a reduction in some flights.

For more: Air-traffic controller shortages could result in fewer flights this summer

But limitations within those airlines’ flight networks to handle consumer demand can push fares higher. And Morgan Stanley said that strong balance sheets, passengers’ willingness to still pay up — albeit in a concentrated industry with a handful of options — and “muscle memory” from being gutted by the pandemic, could make airlines “defensive safe-havens,” to some degree, for investors.

“It is hard to argue against the airlines soaring above the macro storm underneath them (at least in the short term),” the analysts wrote in a research note last week.

The numbers to watch

Grocery-store margins: Albertsons Cos.
— the grocery chain whose merger deal with Kroger Inc.

has raised concerns about food prices and accessibility — reports results on Tuesday. Higher food prices have helped fatten grocery stores’ profits, even as consumers struggle to keep up. But Costco Wholesale Corp.
in reporting March same-store sales results, noted that “year-over-year inflation for food and sundries and fresh foods were both down from February.” The results from Albertsons could offer clues on whether shoppers might be getting a break from steep price increases.

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