Defense Stocks Fall, Despite Rising North Korea Risks (ITA)

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September 26, 2017 6:35am ETF BASIC NEWS

From Zacks: Shares of companies with ties to U.S. defense spending, including Lockheed Martin (LMT) and Boeing (BA), fell on Monday despite newly intensified rhetoric from North Korea regarding the possibility of war with the U.S.

North Korea Tensions

North Korea’s foreign minister Ri Yong Ho said on Monday that the U.S. had declared war on his country, according to a Wall Street Journal report. The foreign minister’s claim was reportedly in response to a Saturday flyover of U.S. bombers and fighter jets near North Korea–north of the Demilitarized Zone–and a tweet from President Donald Trump.

But the U.S. has a different view of those flights, and President Trump took to Twitter (TWTR – Free Report) Saturday to rebuke the North Korean foreign minister’s statements to the U.N. over the weekend.

“This mission is a demonstration of U.S. resolve and a clear message that the president has many military options to defeat any threat,” Defense Department spokesman Dana White said in a statement over the weekend. “North Korea’s weapons program is a grave threat to the Asia-Pacific region and the entire international community.”

The North Korean minister told reporters on Monday that North Korea had “every right to make countermeasures, including the right to shoot down U.S. strategic bombers, even if they are not yet inside the air-space border of our country.” The official said that every possible option for a North Korean response is on the table.

Ri Yong Ho also said if North Korea takes action against U.S. military planes that “the question of who will be around much longer will be answered then.”

U.S. officials were quick to respond and try to curb the further escalation of tensions. “We continue to seek a peaceful denuclearization of the Korean peninsula,” State Department spokesman Justin Higgins said. “No nation has the right to fire on other nations’ aircraft or ships in international airspace or waters.”

White House Press Secretary Sarah Huckabee Sanders also responded and said that claims that the U.S. declared war against Kim Jong Un’s regime were “absurd.”

Defense Stocks

Despite the revved up and continued war of words between Washington and Pyongyang, shares of some of the biggest U.S. aerospace and defense companies fell.

Lockheed Martin stock dipped 0.41% while Boeing saw its stock price fall 0.85%. Shares of Raytheon (RTN – Free Report) fell 0.54%, while General Dynamics (GD – Free Report) and Northrop Grumman (NOC – Free Report) stock experienced more marginal declines.

Defense ETFs,including the PowerShares Aerospace & Defense ETF (PPA – Free Report) , the SPDR S&P Aerospace & Defense ETF (XAR – Free Report) , and the iShares US Aerospace & Defense ETF (ITA – Free Report) all fell by about 0.50%.

Aside from defense stock dips, the iShares MSCI South Korea Index Fund ETF (EWY – Free Report) , which tracks South Korean companies, fell by 0.65%.

The iShares Dow Jones U.S. Aerospace & Defense ETF (ITA) was unchanged in premarket trading Tuesday. Year-to-date, ITA has gained 26.58%, versus a 12.39% rise in the benchmark S&P 500 index during the same period.

ITA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 30 ETFs in the Industrials Equities ETFs category.

This article is brought to you courtesy of Zacks Research.

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