Defense Stocks (BA, LMT) Climb On Trump’s Renewed Afghanistan Commitment – August 22, 2017


Shares of several companies with ties to U.S. defense spending, including Boeing (BA Free Report) and Lockheed Martin (LMT Free Report) , climbed on Tuesday, just one day after President Donald Trump announced a rededication of U.S. military forces in Afghanistan.

President Trump announced that the U.S. would expand its role in Afghanistan during a roughly 30-minute speech on Monday. The president did not specify how many new troops would be deployed in the country or provide a timetable for the operation. However, White House military officials pointed to an increase of up to 4,000 additional U.S. troops.

The new U.S. military forces in Afghanistan will be deployed for counterterrorism and military training purposes, which does not differ much from former president Barack Obama and his administration’s tactics in the region.

Currently, 8,400 Americans are stationed in Afghanistan, along with roughly 4,000 North Atlantic Treaty Organization troops, based on most estimates. President Trump noted that the added forces are supposed to help fight against the Islamic State and other terrorist organizations such as the Taliban. Some of the troops will focus on training Afghan forces.

On the back of the news, shares of Northrop Grumman (NOC Free Report) and Boeing (BA Free Report) both jumped by over 1.5% on Tuesday. Lockheed Martin (LMT Free Report) , Raytheon Company (RTN Free Report) , and General Dynamics (GD Free Report) all saw their stock prices gain between 1% and 1.4%.

U.S. defense-based ETF prices also jumped after the announcement was made. Shares of the iShares US Aerospace & Defense ETF (ITA Free Report) , the PowerShares Aerospace & Defense ETF (PPA Free Report) , and the SPDR S&P Aerospace & Defense ETF (XAR Free Report) all jumped around 1%.

Yet, even with the addition of 4,000 new American troops in Afghanistan, the total numbers will pale in comparison to the more than 100,000 U.S. troops that were stationed in the country at its 2011-peak.

President Trump said the U.S. wouldn’t write “a blank check” nor stay in Afghanistan indefinitely. But the president also came down on one of Afghanistan’s neighbors. “We can no longer be silent about Pakistan’s safe havens for terrorist organizations, the Taliban and other groups that pose a threat to the region and beyond,” President Trump said in his speech on Monday.

The Pakistani stock exchange KSE 100 index fell by 0.40% on Tuesday, which marks a continued downward trend for the index in August.

Additional Gains 

On top of the potential gains from an increased U.S. military presence in Afghanistan, Lockheed Martin recently won a $427 million deal to work on America’s fleet of F-35 Aircrafts. Boeing and Northrop Grumman also won separate $320-plus million deals to begin to replace America’s aging arsenal of intercontinental ballistic missiles.

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