Stock Market News: Halliburton Slides While American Airlines Flies

After a strong gain on Tuesday, the stock market returned to a more conservative tone on Wednesday morning as investors tried to get their bearings following comments from the chairman of the Federal Reserve. Even as many market participants celebrated the apparent openness from Fed Chair Jerome Powell and other officials to consider lowering interest rates if economic conditions deteriorate, long-held concerns about trade and global economic conditions kept stocks from making too many further advances. As of 11:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 138 points to 25,470. The S&P 500 (SNPINDEX: ^GSPC) gained 13 points to 2,816, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was higher by 23 points to 7,550.

Some stocks have responded to macroeconomic factors in other financial markets, and one of the most important has been the recent plunge in oil prices. Falling crude has sent oil services specialists like Halliburton (NYSE: HAL) for a loop, but at the same time, they've been good news for airlines like American Airlines Group (NASDAQ: AAL) that count fuel as one of their largest expenses.

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Halliburton deals with fears of $50 crude

Shares of Halliburton were down 4% on Wednesday morning, generally following a trend among a broader range of oil services stocks. The move came at the same time that crude oil fell another $2 per barrel, dropping below $51.50 and leading some to predict a drop to $50.

The reason for falling oil prices might not be evident in the U.S., where economic activity remains robust. However, demand has weakened across other areas of the globe, and suppliers haven't coordinated successfully to try to limit the amount of crude that's available. At the same time, energy players in the U.S. have boosted production in response to the upward movement in oil prices that the market saw in 2018, and it'll take time for the market to adjust if they decide to curtail their operations.

Halliburton and its peers are sensitive to the capital spending decisions that producers around the world make, and weakness in crude points toward another downward cycle in drilling investment. Unless its customers keep up their drilling activity despite lower prices, Halliburton could continue to see poorer financial performance that could lead to even larger declines.

American Airlines regains altitude

American Airlines Group saw its stock move in the other direction, climbing 4% and adding to an even bigger 7% gain on Tuesday. Falling oil means lower fuel prices, and that's beneficial for American, but the story goes beyond that simple catalyst.

For months now, investors have been nervous about American's relative position in the industry. The airline's decision to be an early adopter of the 737 MAX aircraft has turned out to be problematic, as that portion of its fleet remains grounded pending regulatory approval of planned fixes. Although the impact on American's overall operations is relatively small, it was still enough to prompt the airline to predict hundreds of millions of dollars of negative impact on pre-tax earnings for 2019.

Yet more recently, American has started to show some signs of life. Investors seem to be paying more attention to planned growth opportunities like the company's expansion at its key Dallas-Fort Worth hub, and similar expansions in Charlotte and Washington should add to the positive impact. Key executives have shown their support by making insider purchases of stock, including a 50,000 share buy from CEO Doug Parker amounting to more than $1.4 million and smaller moves from President Robert Isom and a quartet of executive vice presidents.

Airlines in general are vulnerable to economic slowdowns, so investors shouldn't consider the stock cleared for takeoff just yet. But with some of the clouds starting to give way to blue skies, American is in a good position to mount a comeback and fly higher in the months to come.

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Dan Caplinger 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.