Surging aerospace and defense stocks lift these ETFs as investors monitor Israel-Hamas war

Israel officially declared war on Sunday after a surprise attack by Hamas. The attack has left more than 1,000 dead on both sides, the Associated Press reported Monday. At least nine American citizens have been killed in the weekend attacks, the AP said, citing information from the State Department.

“Clearly it’s a huge human tragedy,” Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, said in a phone interview Monday. 

“It seems like we’re entering a different phase globally with respect to geopolitics,” with conflicts appearing more likely compared with the past decade or two, he said. “As countries need to replenish their weapons, we do think defense companies will do very well.”

Wells Fargo Investment Institute upgraded the industrials sector, which includes aerospace and defense stocks, to “overweight” a few months ago, according to Samana. Part of the rationale was tied to its view of geopolitical conflicts becoming more likely, with defense stocks being potentially a place to “hide out because of the more durable demand for the defense-related goods and services.” 

The top five holdings of the iShares U.S. Aerospace & Defense ETF as of Oct. 6 were Boeing
BA,
-0.33%,
RTX Corp.
RTX,
+4.48%,
Lockheed Martin Corp.
LMT,
+7.76%,
Textron Inc.
TXT,
+2.51%
and General Dynamics Corp.
GD,
+8.67%,
according to data on BlackRock’s website. 

Shares of General Dynamics were soaring more than 8% on Monday morning, while Lockheed Martin’s stock surged around 7.6% and RTX jumped more than 4%, according to FactSet data, at last check. Boeing was down modestly Monday morning while Textron shares rose a sharp 2.1%.

The broader U.S. stock market was down on Monday, with the Dow Jones Industrial Average
DJIA
slipping less than 0.1% while the S&P 500
SPX
shed 0.2% and the Nasdaq Composite
COMP
dropped 0.6%, according to FactSet data, at last check.