WSJ What’s News - Boeing Wins Contract For Next-Generation Jet Fighter

Episode Date: March 21, 2025

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

With the Fizz loyalty program, you get rewarded just for having a mobile plan. You know, for texting and stuff. And if you're not getting rewards like extra data and dollars off with your mobile plan, you're not with Fizz. Switch today. Conditions apply. Details at fizz.ca. 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 Osola 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. 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 a next level.

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 US. 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? It's not necessarily gonna 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. So you have two things. 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 Mertz, 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 US 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. 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% 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%, while rival Lockheed Martin was down a little less than 6%. You heard in this morning's show about the severe disruption at London's Heathrow Airport. Well, the effects have cascaded to airline stocks. 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 roller coaster 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 31, 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 investors or scared them off of using these leverage 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% 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? A thing about these funds that not everybody understands at first is they use borrowed money to create a leverage return over a period of one day. A problem with these funds is that if you hold them for a longer period, which they say that they're not intended to be held, the performance can start

to diverge pretty substantially from their stated daily goal. That's because if it starts going down a lot, say you had $10 and the leverage ETF fell by half in a day and now you have $5, even if there's a big rise the next day, your investment has already gone down so much that the percentage gain is having less of an impact on the way up. There can come a point where these go down so much that if an investor held them the whole time,

it's going to be very hard for them to ever recover to their original investment, even if the stock is going up quite a bit again. That was WSJ Markets reporter, Jack Pitcher. Thanks, Jack. Thank you. When Donald Trump won the election, the oil and gas industry popped the champagne. Now it's debating whether the glass is half full or half empty. Colin Eaton covers oil companies for the Wall Street Journal.

Colin, what is making oil and gas companies wary now? The oil and gas industry really does love the rollback regulations and they say they're going to pump more oil. But the concerns now are everything else in terms of trade policy, the tariffs on energy, on steel. They're also concerned about the job cuts related to agencies that permit their projects. So they're all about permit reform, but they see a need for people to be in the seats

to issue permits. The big concern has been the administration's apparent desire for lower oil prices. Those prices are unworkable for the shale industry as we know it today. That's a big concern, and it's been one that they haven't really talked with Trump directly about yet. So what would people in the industry like to see? Overall, the big concern for them is the uncertainty that comes with all this. There aren't a lot of oil and gas companies

that make an investment and have a payout in just four years. A lot of these are big long-term investments and they'll need certainty for a long time. So rather than, you know, a flurry of executive orders, they prefer the Trump administration try to push these things through the legislative route, through Congress, and submit some of this stuff in law. So it's a lot for them to think about right now. That was WSJ reporter Colin Eaton. Thank you, Colin. Thank you. And we exclusively report that Columbia University will agree to President Trump's far-reaching demands in negotiations over $400 million in federal funding he revoked

this month. That's according to a memo from the school to the administration. Colombia has agreed to ban masks, empower 36 campus police officers with new powers to arrest students, and appoint a senior vice provost with broad authority to oversee the Department of Middle East, South Asian, and African Studies as well as the Center for Palestine Studies. The agreement follows a tense week of meetings between the government's recently created task force on antisemitism and the university's board of trustees

and president. Schools nationwide are watching Columbia with alarm and many fear a demand for similar concessions. And that's what's news for this week. Tomorrow you can look out for our weekly markets wrap up, what's news in markets. Then on Sunday, we'll be answering your questions News for this week. Tomorrow you can look out for our weekly markets wrap up, What's News and Markets. Then on Sunday we'll be answering your questions about how the U.S. healthcare landscape may change and what that may mean for you as Medicaid cuts are being debated on Capitol Hill.

That's in What's News Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Anthony Bansi and Pierre Bienamé with supervising producer Michael Cosmitis. Michael Laval wrote our theme music. Aisha El-Muslim is our development producer. Scott Salloway and Chris Inslee are our deputy editors. And Philana Patterson is The Wall Street Journal's head of news audio. I'm Alex Osola. Thanks for listening.