Talk about taking flight. Closing in on almost a two-year high, a major Dow component is leading the aerospace and defense industry as investors take an optimistic outlook on the sector and related exchange traded funds (ETFs).

The Standard & Poor’s Aerospace & Defense Index increased to a yearly high on Thursday as aircraft maker Boeing Co. (NYSE: BA) was on track for its highest close since June 2008, reports Karen Jacobs for Reuters.

Commercial aerospace companies have been gaining strength recently on news that passenger traffic is on the climb. Wayne Plucker, a senior industry analyst at Frost & Sullivan, believes that carriers will likely want to acquire more efficient airplanes to offset the increasing costs of oil prices. [Aerospace and Defense ETFs Benefit from Diversification.]

Boeing’s stock surged 30% this year and defense industry leader Lockheed Martin Corp (NYSE: LMT) jumped 14%. Other aerospace and defense company’s like suppliers Goodrich Corp (NYSE: GR) and L-3 Communications Holdings Inc (NYSE: LLL) have shown improvements.

Defense companies breathed a sigh of relief on news that the United States won’t be dramatically slashing spending this year. The United States still needs to upgrade military equipment abroad, so that should keep defense spending healthy for the time being.

For more information on the aerospace industry, visit our aerospace & defense category.

  • PowerShares Aerospace and Defense (NYSEArca: PPA): BA is 6.58%, GR is 3.99%, LLL is 4.03% and LMT is 6.13%.

  • iShares Dow Jones U.S. Aerospace & Defense (NYSEArca: ITA): BA is 7.01%, GR is 4.16%, LLL is 4.59% and LMT is 6.02%.

  • Claymore/NYSE Arca Airline (NYSEArca: FAA)

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.