U.S. defense stocks are surging in Thursday’s premarket action after comments by President Donald Trump caused whipsaw trading in the sector.
Shares in defense contractors such as Lockheed Martin, Northrop Grumman, and RTX, formerly known as Raytheon, fell sharply Wednesday after Trump pledged to block the companies’ dividends, stock buybacks and what he described as “Over Compensation of Executives” until the sector speeds up its production and maintenance of military equipment.
He reserved particular criticism for RTX, saying the company needs to invest more in plant and equipment. From its intraday high on Wednesday to its post-market low, RTX stock fell almost 10%.
However, shortly after the closing bell rang on Wall Street, Trump then posted that he wanted to boost the country’s military spending by more than 50%, increasing the budget from the current $901 billion to $1.5 trillion.
Trump added that the $1.5 trillion number could be easily hit because of tariffs.
The proposed surge in defense spending caused investors to rush back into the sector, and RTX shares are up 3.2% from Wednesday’s official close in Thursday’s premarket trade. Lockheed Martin is gaining more than 6% and has recovered pretty much all the late Wednesday losses, while Northrop Grumman’s rebound of more than 5% also sees the stock back to where it was prior to Trump’s critical posts.
Some investors expressed exasperation that the President’s comments caused such volatility. Speaking on CNBC’s Fast Money show, trader and regular contributor Guy Adami said it would have been preferable for the president to have mentioned his criticism of the defense companies and his desire to lift the military budget at the same time.
By leaving the couple of hours between posts “to me, reeks of some sort of impropriety,” Adami said.
Meanwhile, news of the proposed boost to the military budget lifted defense stocks in Europe, with U.K. listed BAE Systems leading the way with a 6% jump.
Defense stocks more broadly have enjoyed a strong start to the year after the U.S. incursion into Venezuela and its repeated threats concerning Greenland. The State Street SPDR S&P Aerospace & Defense ETF gained 9% this year.