Aerospace and defense exchange traded funds are touching down as Boeing (NYSE: BA) share prices took a nosedive Wednesday on a softer outlook in light of U.S. government budget tightening.
The iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA) fell 1.7% Wednesday and PowerShares Aerospace and Defense Portfolio (NYSEArca: PPA) dropped 1.4%.
Boeing declined 5.5% Wednesday, dipping below its 50-day simple moving average. The company has a 9.1% weight in ITA and is 6.3% of PPA.
The aerospace giant announced core earnings over the fourth quarter beat expectations but investors focused on Boeing’s cautious outlook.
“We remain very concerned about longer-term U.S. budget uncertainty,” Chief Executive Jim McNerney said in a Reuters article.
Boeing has seen an increase in commercial aircraft deliveries, but some remain cautious about how budget cuts could play out on defense contracts.
The “combination of higher commercial aircraft deliveries than our forecast but lower sales suggests the gap is in defense and space,” Nick Cunningham, managing partner with Agency Partners, said in a Bloomberg article. Boeing management “has been cautious about the defense outlook, despite an improving budget background.”
Boeing is also a large component in the Dow Jones Industrial Average. The SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA), which has a 5.5% allocation to BA, was down 0.7% Wednesday.
Industrials were the top-performing Dow sector last year with Boeing contributing almost 444.5 points to the blue chip index’s ascent. The Dow is a price-weighted index and Boeing is currently DIA’s fourth-largest holding, just ahead of Caterpillar (NYSE: CAT). [Dow Jones Industrial Average Year in Review]
iShares U.S. Aerospace & Defense ETF
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