Markets are broadly lower to mixed to kick off the trading week. Bond yields are higher today, putting pressure on interest-rate sensitive sectors such as real estate and utilities while financials like Morgan Stanley (MS) and Wells Fargo (WFC) outperform.

Usually, higher rates are also associated with declines in the growth-heavy tech sector, but shares of FAANG + Microsoft (MSFT) are bucking the trend today and are building off last week's strength as investors continue to flock into these names for their secular growth qualities and robust free cash flow generation.

Boeing

Catching up on some recent headlines and news, shares of Boeing (BA) are moving lower Tuesday off a pair of disappointing stories from over the weekend. The first story centered on delivery issues, with the Wall Street Journal reporting that deliveries of the 787 Dreamliner could remain halted at least until late October due to disagreements with the FAA over inspection. Analysts had forecasted a restart of 787 deliveries in September, so this ongoing pause (if confirmed) likely means delivery forecasts for the second half of the year are too high and future cash flow generation could come under pressure.

Separately, European airline Ryanair said this weekend it walked away from negotiations with Boeing over a potential new order for 737 MAX jets due to disagreements around price. Boeing and Ryanair are close partners, and a new deal would have expanded upon the 75 jets Ryanair ordered last year, but the two companies could not agree on a price.

"Ryanair is a long-standing partner. We value their business and are committed to supporting them," a spokesperson at Boeing said. "At the same time, we continue to be disciplined and make decisions that make sense for our customers and our company."

We think this is a negotiating tactics by Ryanair. They need to increase the size of their fleet due to future demands, and currently there are two options for them: the 737Max by Boeing or the A320/A321 by Airbus. There is no way Airbus would be able to make as many planes for Ryanair, they are currently booked up with production. Also, it would not be cost-effective for Ryanair to all of a sudden move towards operating Airbus planes. Ryanair has only been operating Boeing's planes. To be able to operate Airbus' planes now, they will need to have training, facilities and maintenance, which would not be cost-effective and time-effective.   

Bottom line, we are disappointed by both stories as they highlight the ongoing challenges the company has experienced in manufacturing/inspection execution and competition for market share. We would wait on buying the dip in BA this afternoon if interested, but we will continue to hold this name on the belief that progress is being made between Boeing and China on the 737 MAX recertification process.

Drug Stocks

Lastly, drug stocks were trading in the red Tuesday after analysts at Morgan Stanley adjusted their ratings and price targets on a handful of names in the group. Notably, Morgan Stanley downgraded its Amgen (AMGN) , Merck (MRK) , and Johnson & Johnson (JNJ) ratings to Equal-Weight from Overweight. One common theme behind the three downgrades was that the analyst viewed upside at each stock's current valuations had become limited.

Morgan Stanley maintained its Overweight rating on AbbVie (ABBV), but it's not surprising to the stock trade lower in today's session. Whenever a cluster of downgrades occurs within a single group, the negative sentiment tends to spread out to peers. For this reason, we think the recent selloff in ABBV represents an opportunity.