Defense Stocks Are a Rare Bright Spot in Friday's Session
January 03 2020 - 12:33PM
Dow Jones News
By Michael Wursthorn
Aerospace and defense stocks rose in the wake of the U.S.'s
killing of an Iranian general as some investors wagered tensions
between the two countries will ratchet higher.
But some analysts urged investors to look past the latest
flare-up in geopolitical tensions and pounce on the broader stock
market's pullback.
Shares of global security company Northrop Grumman Corp. led the
defense rally, jumping 4.4% to be on pace for their biggest single
day gain since late July. Lockheed Martin Corp., L3Harris
Technologies Inc. and Raytheon Co. all rose more than 1%.
That helped push the $5.6 billion iShares U.S. Aerospace and
Defense ETF up 1% in recent trading.
The defense rally represented a rare bright spot in the stock
market Friday. Investors mostly retreated from stocks following the
overnight strike, selling everything from airliners to banks to
technology companies, while buying gold, oil and U.S. Treasury
bonds. The S&P 500 was recently down about 0.5%, unraveling its
gain for the week.
Some Wall Street analysts warned investors to avoid making
knee-jerk decisions following the strike. Mark Haefele, global
chief investment officer at UBS's wealth-management arm, said
individual geopolitical risks such as this tend not to be enough to
be a long-term driver of stock prices.
"Geopolitical events by their nature are unpredictable, but
previous periods of increased tensions suggest that the impact on
wider markets tends to be short-lived, with more lasting effects
confined to local markets and assets that are directly impacted by
the tensions," Mr. Haefele said.
Corporate profits and changes within the U.S. economy should
remain the driving focus of investment decisions, even for
aerospace stocks, which tend to see a boost following a
geopolitical flare-up, analysts said.
If anything, investors should consider pouncing on some of the
stocks investors were selling on Friday, such as shares of tech
companies, said Dan Ives, a managing director of equity research at
Wedbush Securities.
Mr. Ives recommended using shock events to buy favored tech
stocks and other risky assets, such as shares of Apple Inc. Shares
of the iPhone maker have more than doubled over the past year but
were off 0.7% Friday.
"We remain firmly bullish on tech stocks and the growth
prospects of the coming year and believe any temporary risk-off
trade is a golden buying opportunity rather than a time to retreat
with the bears yelling fire in a crowded theater," Mr. Ives
added.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
January 03, 2020 12:18 ET (17:18 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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