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What happened
Shares in industrial giant General Electric (NYSE: GE) fell more than 6% by midday today. The fall comes in concert with a day of negative sentiment over the economy and the aerospace sector in particular.
It’s no surprise to see GE stock down heavily on Monday when Boeing and other aviation stalwarts are down big, given the importance of commercial aviation (and Boeing) to GE’s prospects. GE Aviation remains the company’s most significant profit and cash flow generator.
In addition, GE’s position as the world’s leading aircraft engine company means the aviation industry is always front and center in GE’s world. Therefore, when the market stresses economic growth prospects, it’s also worried about transportation activity, which means fewer flights and less demand for aircraft engines and aftermarket parts.
Image source: Getty Images.
So what
The market is worried about growth today because of the tightening of COVID-19 restrictions in China. The lockdowns will hurt economic growth and air travel in particular.
In addition, GE’s cost and supply chain issues (which cut across all its segments) have magnified partly in response to significant supply chain dislocations created by lockdowns in Shanghai and the war in Ukraine. With neither of those looking like they will end quickly, it’s understandable if investors start pricing in lower earnings expectations for GE; as a reminder, management has already guided toward the low end of its earnings range for 2022.
Now what
As ever, watch events. While both of the circumstances referred to above don’t seem likely to change anytime soon, they are both consequences of political decisions. As such, they can both be resolved in due course so that the global economy can get back into recovery mode.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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