Market Extra: 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 and Israel’s response have left more than 1,100 dead on both sides, the Associated Press reported Monday. And the death toll for American citizens in the war has risen to 11, the AP said, citing an announcement from President Joe Biden.

“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 Co.
BA,
+0.59%,
RTX Corp.
RTX,
+4.62%,
Lockheed Martin Corp.
LMT,
+8.93%,
Textron Inc.
TXT,
+3.00%
and General Dynamics Corp.
GD,
+8.43%,
according to data on BlackRock’s website. 

Shares of General Dynamics soared 8.4% on Monday, while Lockheed Martin’s stock surged 8.9% and RTX jumped 4.6%, according to FactSet data. Boeing ended modestly higher Monday, with a 0.6% gain, while Textron shares rose a sharp 3%.

The broader U.S. stock market finished higher Monday, with the Dow Jones Industrial Average
DJIA
and S&P 500
SPX
each rising 0.6% while the Nasdaq Composite
COMP
edged up 0.4%, according to FactSet data.