There is an old adage that the market hates uncertainty. Apparently that does not apply to Boeing (BA) today which announced that it was suspending its full year guidance due to the uncertainty created by the problems caused by the 737 MAX and is suspending its stock buyback program.
The company also missed EPS estimates but the market appears to be pleased that things are not worse. The stock is trading up about 1% and is holding well above key support at the 200 day simple moving average which is around $362.
What is saving Boeing from breaking down further is the simple fact that there is strong demand for aircraft. Long term Boeing expects a doubling of the global fleet of aircraft and the sooner it returns the MAX to service the quicker it can return to grow.
The company has to re-earn trust from its customers and the software fix for the MAX will take time and that is what is going to hold the stock back in the short term.
The long term story still sounds very good but right now the stock is stuck in the middle of a trading range between $400 and $360. That is likely to continue for a while with bargain hunters looking for entry at the lower end of the range but momentum buyers are not interested until the stock regains the $400 level.
The response to the Boeing earnings report is a good example of how tough it is to bet on how the market will react to earnings. Even if you do predict the numbers it is still very difficult to guess what the market may do with the news. Boeing traded up on what would normally be troubling news, and Texas Instruments (TXN) also reacted well despite comments about semiconductor sales remaining soft for a couple more quarters.
If you want the best odds then it it typically better to trade after the news has hit and the market is trying to sort out what it means. This is a much higher odds situation than buying in front of a report with all its uncertainties.
Microsoft (MSFT) and Facebook (FB) report tonight, and I wouldn't even try to guess what the news might be and how the market will react. Tomorrow morning will be the time to come up with a trading strategy for the stocks.
The indices are rolling over at midday as a mild bout of profit taking hits. I expect things to stay choppy as we await the next round of earnings news.