BUZZ-Defense, government contractor stocks extend recent slide as investors eye DOGE
Shares of defense and government contractor stocks are experiencing a decline, with General Dynamics down 1.4% and other firms like Lockheed Martin and Northrop Grumman also falling. Concerns about the potential impact of the Department of Government Efficiency (DOGE) under a second Trump administration are driving this trend, as analysts warn of possible budget cuts and policy changes that could affect contractor earnings. The S&P 500 Aerospace & Defense index dropped 3.6% recently, reflecting increased uncertainty in the sector.
Shares of defense firms and government contractors continue recent losing streak on Fri as Wall Street eyes potential impact of a second Donald Trump administration
General Dynamics (GD.N) off 1.4% on Fri, after stock plunged nearly 7% on Thurs Peers Lockheed Martin (LMT.N) Northrop Grumman (NOC.N) , RTX, (RTX.N) formerly Raytheon, and L3Harris (LHX.N) also down in session, adding to steeper losses on Thurs, when S&P 500 Aerospace & Defense index (.SPLRCAERO) sank 3.6%
Stocks of government contractors diving again on Fri: Leidos (LDOS.N) 5%, Science Applications International (SAIC.O) ~6%, Booz Allen Hamilton (BAH.N) 3%, CACI International (CACI.N) 3%
“The direct trigger is emerging concern about the Department of Government Efficiency (DOGE) and how it may result in budget cuts and policy changes that reduce contractor earnings,” JP Morgan wrote in research note on Thurs U.S. President-elect Trump on Tues named Elon Musk and former Republican presidential candidate Vivek Ramaswamy as heads of the newly created agency Impact from DOGE is “very far from clear”, JP Morgan said, adding “more uncertainty around future results along with headline risk could continue to pressure contractor valuations”
Jefferies in note on Thurs said delayed selloff in IT services names post-election reflects increasing uncertainty and likely volatility under the new administration, including introduction of DOGE In note on Weds, Truist analysts said should Pentagon spending come under scrutiny, “costly weapons systems that are years behind schedule, failing to meet capability and readiness needs, and incur excessive sustainment costs are a likely priority”
Should this occur, largest traditional defense contractors such as LMT, RTX, Boeing (BA.N) , GD and NOC would be at most risk, Truist said
