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Stock Market Today, March 2: American Airlines Drops as Oil Prices Surge on Middle East Tensions

Motley Fool - Mon Mar 2, 4:57PM CST

American Airlines Group(NASDAQ:AAL), provider of scheduled air transportation services for both passengers and cargo, closed at $12.52, down 4.21%. Shares declined as Middle East-related flight disruptions and a sharp rise in oil prices pressured airline stocks. Investors are also watching the impact of sustained fuel cost inflation and demand weakness on future quarters.
Trading volume reached 86.7 million shares, coming in about 52% above its three-month average of 56.9 million shares. American Airlines Group IPO'd in 2005 and has fallen 35% since going public.

How the markets moved today

S&P 500(SNPINDEX:^GSPC) inched up 0.04% to 6,882, while the Nasdaq Composite(NASDAQINDEX:^IXIC) gained 0.36% to finish at 22,749. Among airlines, industry peers Delta Air Lines(NYSE:DAL) closed at $64.25 (-2.21%) and United Airlines(NASDAQ:UAL) finished at $103.21 (-2.91%) as travel names also reacted to geopolitical tensions and fuel-cost worries.

What this means for investors

Airline stocks plunged after developments in the Middle East this past weekend. Missile strikes in the region closed airspace, disrupted flights, and sent oil and jet fuel prices sharply higher. That’s a major input cost that has investors fretting about margin impacts.

The U.S.-Israel strikes on Iran and retaliatory moves resulted in thousands of cancellations and renewed fears of weaker international demand. The rise in fuel costs comes at a time when American Airlines is planning a $1 billion investment to expand its presence at Miami International Airport.

Investors don’t want to see a negative impact on revenue and profitability just as the company is making expansion moves.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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