Defense Stocks Rise on Election News; GOP's Congressional Gains Trigger Confidence in Industry spending.(BUSINESS)
Byline: Tim Lemke, THE WASHINGTON TIMES
Republican victories on Election Day triggered a four-day rally among defense stocks last week, as investors anticipated quicker resolution on homeland security, and more congressional support for a bigger Pentagon budget and programs such as missile defense.
The Standard & Poor's Aerospace and Defense Index rose more than 11 points, or 6.1 percent, from Tuesday to Friday. Shares of Bethesda-based Lockheed Martin, the largest U.S. defense contractor, rose $6.20, or 12 percent, to close the week at $56.43. Shares of Falls Church-based General Dynamics rose $4.10, or 5.3 percent, to close the week at $81.60. Boeing, Raytheon and Northrop Grumman all saw sizable gains.
The rally last week restored defense stocks to levels not seen since early October. They had fallen gradually in the past month as some investors shifted their money to less-expensive stocks and others remained cautious, waiting to see whether Republicans would take control of Congress. Speculation that Democrats would remain in power caused some stocks to dip in the days before the elections.
To some analysts, a surge in defense stocks came as no surprise, given the strong support defense funding traditionally has received from Republicans.
"A GOP House and Senate is likely to make it easier for [President] Bush to push through higher defense spending," Banc of America Securities defense analyst Nick Fothergill said in a written recap of a conference call held Thursday. "Pet projects like missile defense should get an easier ride."
Mr. Fothergill said more Democratic victories on Election Day might have caused some second-guessing of congressional approval of action against Iraq.
"A Democrat win might have made the administration reconsider their hard-line stance on Saddam [Hussein]," he said. …