Boeing's Dreamliner -- and Its Stock -- Are Flying

U.S. stocks started the week off on a strong note, as the S&P 500 (SNPINDEX: ^GSPC  ) and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) both gained 0.7% and 0.1%, respectively. That was enough to push the S&P 500 to a record high, with the index recording gains in six of the last seven trading sessions. That consistency on the upside is also present when we widen out the timescale: With one day left in April, the S&P 500 is ahead 1.6% on the month, which means it is well positioned to record its sixth consecutive monthly gain -- its longest streak since Sep. 2009.

Somewhat unusually, in light of stocks' buoyancy, the VIX Index (VOLATILITYINDICES: ^VIX  ) , Wall Street's fear gauge, rose today by 1%, to close at 13.71. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.) This may be the result of hedging activity by investors in the run-up to the Fed's rate-setting meeting on Tuesday and Wednesday

Flying high!
What an extraordinary turn of events! I never expected to hear that a Boeing (NYSE: BA  ) 787 Dreamliner would be up and flying -- in a scheduled commercial flight, not a test flight -- before the month of April was out. Yet that's exactly what happened on Saturday, as Ethiopian Airlines flight 801 took off from the Ethiopian capital of Addis Ababa en route to Nairobi, Kenya. (It did arrive safely, in case you were wondering.)

On Sunday, Japanese airline ANA, which is the largest operator of 787s, with a fleet of seventeen, conducted a test flight, two days after Japanese regulators lifted a flight ban on the aircraft. ANA said it may resume commercial flights in June.

Regulators worldwide grounded the Dreamliner in January, following two incidents in which the aircraft's advanced lithium-ion battery unit overheated, producing smoke and catching fire.

I'm puzzled that regulators have approved what looks like an aggressive flight resumption timetable, particularly if one considers that the cause of the problem has not been identified. Instead, Boeing has proposed a series of modifications, including a different battery containment enclosure, which were approved by the FAA on April 19.

The market, on the other hand, seems to have discounted this best-case scenario from the outset, despite the massive headline risk the company faced:

Source: BA data by YCharts.

The shares barely went into negative territory and, although they did underperform the market through February, they now have the S&P 500 eating their dust. While that price behavior seems extraordinary to me, it suggests two things: First, the market had a better appreciation for this story than I did, and, second, the stock began the year significantly undervalued.

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