On its surface, the meeting with U.S. President Donald Trump and North Korean leader Kim Jong-un may have proven to be a success in terms of establishing a peace agreement and denuclearization, but aerospace and defense ETFs got nuked in the process on Tuesday.
Before the close of the market, aerospace and defense ETFs were having their worst day since May 31.
“Worst day in a couple of weeks, down almost 1% if you look at the main ETFs in the group,” said Mike Santoli, CNBC Senior Markets Commentator.
Aerospace & Defense ETFs Close Down
The aerospace and defense ETFs affected at the close of the market on Tuesday included the iShares U.S. Aerospace & Defense ETF (BATS: ITA)—down 0.95%, SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR)—down 1.02%, the Invesco Aerospace & Defense ETF (NYSEArca: PPA)—down 0.84%, and Direxion Daily Aerospace & Defense Bull 3X Shares (NYSEArca: DFEN)—down 2.95%.
Related: Did Trump Get Enough out of the North Korea Summit?
Interestingly enough, DFEN is up 0.12% as of 4:15PM Eastern Daylight Time in after hours trading, so the bloodbath in aerospace and defense ETFs could simply be a profit-taking measure for short-term traders. If that is in fact the case, then it should have no long-term implications on the industry as a whole and the market fundamentals should remain solid in the future.
“You could say that this is just an opportunity to have some very strong stocks pull back on some profit-taking when you have one global hot spot in North Korea, which might be moderately cooling at the margins,” said Santoli. “But nobody really thinks it changes the longer-term story in terms of the aerospace cycle or defense spending plans. Obviously, those budgets are pretty well in place.”
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