Smallest member of the 737 Max cleared by FAA

Boeing's stock led Dow gainers on Monday.

Shares of Boeing were rallying more than 6% to lead the Dow's gainers after the aerospace and defense company cleared an important regulatory hurdle on Monday.

The Federal Aviation Administration cleared for commercial service the smallest of Boeing's $(BA)$ 737 Max planes, the 737 Max 7, the company said Monday.

That review had been going on for nearly a decade, and Wall Street took the clearing as one more sign that Boeing's turnaround continues apace.

It also bodes well for the eventual certification of Boeing's 737 Max 10. That aircraft completed final tests last month.

Boeing's stock is on track for its highest close in nearly a month and its largest one-day percentage increase since Dec. 2, when it rose 10%. In addition to being the best performer in the Dow Jones Industrial Average DJIA, it was also among the top 10 best performers in the S&P 500 index. SPX

The FAA clearance "validates the rigor of our airplane's design and recognizes the determination and resilience of our 737 MAX development team," Boeing said in a statement.

The 737 Max 7 is the smallest and longest-range member of the 737 Max family, offering 135 to 160 seats and providing about 10% more range potential than its siblings, the company said. That's a sweet spot for airlines, as the plane would be flexible enough to be used in a variety of domestic and short-haul international flights.

There are 282 Max 7 orders as of the end of June, representing 6% of the total 737 Max backlog of 4,846 aircraft, analysts at Jefferies said.

Southwest Airlines $(LUV)$ is in line to be the 737-7 launch customer. Shares of Southwest rose 3% on Monday, amid bigger gains for some of its U.S. rivals and a 3.6% advance for the U.S. Global Jets ETF. JETS

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Also helping the stock, analysts at BNP Paribas earlier Monday upgraded their rating on Boeing shares to the equivalent of buy, saying that one of the tailwinds for the company is certification of both the Max 7 and Max 10.

The certifications "will drive inventory liquidation and operational stability," the analysts said.

-Claudia Assis