The stock market didn't make huge moves on Wednesday morning, as most investors had their eyes squarely focused on the Federal Reserve. The central bank's Federal Open Market Committee concludes a two-day meeting later today, and many expect that the Fed will either cut interest rates outright or signal its intent to do so in the near future. Pending final word, stocks generally treaded water. As of 10:45 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 39 points to 26,504. The S&P 500 (SNPINDEX: ^GSPC) was unchanged at 2,918, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) fell 9 points to 7,944.
In company-specific news, Southwest Airlines (NYSE: LUV) lost some altitude in the wake of issuing new guidance for the coming months. Meanwhile, Harley-Davidson (NYSE: HOG) followed up on a controversial move that will take some of its new production into the Chinese market.
Southwest makes some course changes
Shares of Southwest Airlines were down 1% after the airline made adjustments to its forecasts for the second quarter of 2019. The moves included some positive changes on the earnings front, but they also reflected realistic expectations about the likely fate of its fleet of 737 MAX aircraft.
Image source: Southwest Airlines.
Southwest's changes to its guidance on operating revenue per available seat mile were encouraging. The company raised the lower end of its range on that measure by a percentage point, expecting a solid 6.5% to 7.5% increase for the second quarter.
However, there will be some downward pressure on other financial results from the ongoing grounding of the 737 MAX. Southwest said that it has now extended its projections to account for its 34 MAX aircraft being out of operation through early September. That will result in less fuel-efficient operations, as well as lower overall capacity, with available seat miles to fall 3.5% versus prior projections of a 2% to 3% drop.
Southwest has worked hard to try to manage its flight schedule to deal with the lack of availability of the MAX model. Yet the longer the problems persist, the more difficult it'll be for the airline to keep its focus squarely on fostering long-term growth.
Harley pursues smaller models overseas
Harley-Davidson's stock moved higher by almost 1% as investors reacted to news that the iconic motorcycle manufacturer will make a strategic move that should result in more production happening overseas. The decision also highlights an interesting decision that the company has made with respect to its product line.
Harley announced that it will enter into a partnership with Chinese company Qianjiang Motorcycle, with the intent of providing smaller motorcycles to consumers in the fast-growing Chinese market. With an engine size that's barely half what many of its larger motorcycles in the U.S. market have, Harley's new entrant in China will fit better with the wide range of motorcycles and mopeds that compete for business in the world's most populous nation.
Harley has seen success in the Chinese market, but it's come at the cost of political controversy. The White House hasn't approved of the motorcycle giant's decision to move manufacturing capacity to serve foreign markets directly, as it arguably runs counter to the intent of its imposition of tariffs and other trade restrictions.
With motorcycle sales having been under pressure in its domestic market, Harley-Davidson's efforts to drum up business internationally make perfect sense. Harley fans might not like the idea of what they'd consider toy-sized bikes compared to the motorcycles that they ride, but they'll appreciate it if success overseas allows the company to keep building the vehicles they prefer.
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