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Defense Stocks Climb After North Korea Launches Missile Over Japan

Shares of companies with ties to U.S. defense spending, including Raytheon (RTN), jumped on Tuesday as tensions surrounding North Korea escalated once again, this time in the wake of a missile launch over Japan.

Shares of companies with ties to U.S. defense spending, including Raytheon RTN, jumped on Tuesday as tensions surrounding North Korea escalated once again, this time in the wake of a missile launch over Japan.

North Korea

North Korea launched a missile over the northern Japanese island of Hokkaido, which eventually landed in the Pacific Ocean. Pyongyang missile launches have become all too commonplace, but the most recent one over Japan was the first of its kind in almost a decade.

Kim Jong Un’s regime had never launched a missile over a major foreign population center—his deceased father, Kim Jong Il last fired over Japan’s main islands in 2009. The newest provocation caused not only heightened responses from world leaders, including Japanese Prime Minister Shinzo Abe, but helped to send markets and indexes down as well.

“A missile launch across Japan is an outrageous act that poses an unprecedented, grave and serious threat, and significantly undermines the peace and security of the region,” Prime Minister Abe said in a statement. “The Government has lodged a firm protest against North Korea. We ask the United Nations Security Council to convene an emergency meeting.”

Japanese Defense Minister Itsunori Onodera said he will ask for funds to begin to utilize a land-based version of an anti-missile system used by U.S. battleships called the Aegis Ashore, according to the Wall Street Journal. One unit of the defense system, which is manufactured by Lockheed Martin LMT, costs about $80 billion.

The escalating tensions out of North Korea also prompted President Donald Trump to respond.

“The world has received North Korea’s latest message loud and clear: this regime has signaled its contempt for its neighbors, for all members of the United Nations, and for minimum standards of acceptable international behavior,” President Trump said in a statement released by the White House.

“Threatening and destabilizing actions only increase the North Korean regime’s isolation in the region and among all nations of the world. All options are on the table.”

Defense Stocks

On the back of escalating North Korean tensions, U.S. defense-based stocks saw gains on Tuesday. Shares of Raytheon (RTN) climbed over 1.80% to touch a new all-time high of $182.05 a share. Lockheed Martin LMT stock jumped by 1.35% and just missed matching its all-time high.

Shares of Northrop Grumman NOC and Boeing BA both gained around 1%, while General Dynamics GD rose 1.25%.

Defense ETFs,including the PowerShares Aerospace & Defense ETF PPA and the SPDR S&P Aerospace & Defense ETF XAR, both saw their stock prices rise by over 1%. The iShares US Aerospace & Defense ETF ITA gained 0.90%.

Other Movement Tied To North Korea

Aside from the upward movement by military defense stocks, companies and indexes in the region fell.

The iShares MSCI South Korea Index Fund ETF EWY, which tracks South Korean companies, fell by 0.84%. The Nikkei-225 index, which tracks top-rated Japanese companies listed on the Tokyo Stock Exchange, closed down 0.45%. The Nikkei has fallen by 2.82% over the last month.

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Boeing Company (The) (BA) : Free Stock Analysis Report
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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
Raytheon Company (RTN) : Free Stock Analysis Report
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