P.M. Edition for Mar. 21. President Trump announced Boeing has been selected to build a sophisticated jet the Air Force believes is vital to deter China’s military in the decades ahead. Plus, the oil-and-gas industry was excited when President Trump got elected. But now, as WSJ reporter Collin Eaton tells us, the industry is feeling nervous. And leveraged single-stock ETFs became Wall Street’s newest roller-coaster trade last year, with billions flowing into them. Today, their value is plunging. WSJ markets reporter Jack Pitcher explains why. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the key announcements in today's episode?
Boeing wins a contract to make what might be the most expensive fighter jet in history. Plus, the oil and gas industry was excited about a Trump presidency. Now it's feeling less certain.
President Trump has certainly signaled that he wants his administration to be all good for the oil and gas industry. But it does seem like there's going to be tension along the way.
And investors poured billions into leveraged ETFs. Now their value is plunging. It's Friday, March 21st. I'm Alex Zosula for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.
Chapter 2: Why did Boeing win the contract for the next-gen fighter jet?
Boeing has been selected to build what may turn out to be the most expensive fighter in history, a sophisticated jet the Air Force believes is vital to deter China's military in the decades ahead. President Trump announced the new program at the White House today.
The F-47 will be the most advanced, most capable, most lethal aircraft ever built. An experimental version of the plane has secretly been flying for almost five years, and we're confident that it massively overpowers the capabilities of any other nation. There's no other nation. We know every other plane. I've seen every one of them. And it's not even close. This is at next level.
Chapter 3: What are the potential costs and implications of the F-47 fighter jet?
The Pentagon hasn't released cost estimates for the program, but experts say the total research, development, and acquisition costs could top $50 billion. Lockheed Martin had been vying with Boeing for the contract. The fighter's future had been in doubt after the Biden administration opted to leave the final decision on how to proceed to the incoming Trump administration.
Elon Musk, the billionaire and Trump ally, has publicly campaigned against manned aircraft, which he had said were, quote, obsolete in the age of drones. Germany's parliament has authorized a massive spending package that includes as much as 1 trillion euros, or just over a trillion dollars, in civilian and defense investments to build up its infrastructure and reduce military reliance on the U.S.
The journal's Germany bureau chief Bertrand Benoit is here to tell us more. So how would this work on a practical level? The incoming coalition government seems to be split on a number of issues, right?
Chapter 4: How is Germany planning to enhance its defense spending?
It's not necessarily going to be a big fight. It's more going to be technically complicated. So you have two things. You have a 500 billion infrastructure fund, which is limited in size and in time. It runs over 12 years. And then on the other hand, we have the military spending. And there, what you have is unlimited in time and in scale. So essentially...
What the Germans have decided is that any spending that is higher than 1% of GDP is not going to be subject to the fiscal rules that the country has. And so essentially, Germany will be able to spend as much on the military going forward as investors are ready to lend to it.
Yeah, let's talk a little bit more about this money used for defense. Are any American defense companies expected to benefit from this?
That's a very interesting question, because initially we had an interview with Friedrich Merz, who was in line to become the next chancellor, just before the election. And one of his messages at the time was that he would encourage German military to invest more in U.S. hardware. Now the tables have turned a bit because there is this sense that
The security of Europe is no longer a priority for the U.S. and therefore that perhaps Europe should be looking after its defenses on their own. And that means supporting their own defense industry. And there's a higher likelihood that given the choice, the procurement will go to European defense companies and this being Germany to German defense companies.
That was WSJ Germany Bureau Chief Bertrand Benoit. Thank you, Bertrand.
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Chapter 5: What impact did the fighter jet contract have on stock markets?
Thank you, Alex.
It was a week of big swings for U.S. markets, with the impact of the Fed's decision to hold rates steady and concerns over the effects of President Trump's trade policies continue to loom. Today, though, major U.S. indexes ended the day slightly higher. The Dow and the S&P 500 both rose about 0.1 percent, and the Nasdaq was up about half a percent.
With the news about the new fighter jet, Boeing ended the day up just over 3 percent, while rival Lockheed Martin was down a little less than 6 percent. You heard in this morning's show about the severe disruption at London's Heathrow Airport. Well, the effects have cascaded to airline stocks.
Chapter 6: Why are leveraged single-stock ETFs plunging?
European carriers like IAG, the parent of British Airways, Ryanair, Air France, KLM, and Lufthansa all saw their shares go down. Heathrow, one of the busiest airports in the world for international traffic, said that some flights have resumed, but it expects significant disruptions for days to come. Coming up, Wall Street's newest rollercoaster trade, the leveraged single-stock ETF, is plunging.
That's after the break. The recent market dip has been bad news for many investors, but few more than those invested in leveraged exchange-traded funds, or ETFs. These are funds that use borrowed money to amplify their bets on one or more assets. And that's meant that record highs in stocks have meant big money.
According to Morningstar, in the 12 months ending January 31st, assets under management in leveraged ETFs jumped by 51%. to $134 billion. But now several of the most popular leveraged ETFs have erased most of their value in a matter of weeks. Jack Pitcher, who covers markets for the journal, joins me for more. So, Jack, people have been really into these leveraged ETFs since last year.
They've been riding the roller coaster of the market, taking bigger risks. Now they're losing a lot of money, right? Why is this happening now?
Part of the reason for that is investors looking to get rich quick, people who are attracted to gambling with their money. Some of these ETFs can have huge gains and losses in a single day. And for most of the last two years, it's been huge gains. People have flocked to these products and they make it easy to make really large bets on a single stock or a stock index.
So have these big losses deterred investors or scared them off of using these leveraged ETFs?
There's plenty of investors who bought these last year and now some of them, depending on the ETF they're in, are down 80 percent from highs. We can look at the inflows and outflows from these funds and we're actually still looking at net inflows for the year, meaning people have put more money into them than they've taken out of them.
Granted, there could be lots of people holding these funds that are sitting on huge paper losses. They just haven't sold and realized those yet because they're probably hoping they go back up.
What's the longer term picture here?
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