Aerospace and defense ETFs jumped Monday as the Senate is widely expected to pass a $700 billion defense policy bill to bolster the Pentagon’s budget, stop the closure of military bases and expand on U.S. missile defenses in light of heightened risks posed by an increasingly bellicose North Korea.
On Monday, the iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA) gained 1.6%, PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) rose 1.2% and SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR) all increased 2.0%.
A defense bill is expected to be approved Monday by a wide margin on bipartisan support as President Donald Trump, who has not voiced any intent to veto the measure, pushes for cooperation with congressional Democrats, reports Richard Lardner for the Associated Press.
The Senate bill would provide $640 billion for core Pentagon operations, including purchasing weapons and paying troops, along with another $60 billion for wartime missions in Afghanistan, Iraq, Syria and elsewhere. The bill would also include $8.5 billion allocated to strengthen U.S. missile and defense systems in light of North Korea’s nuclear program and missile tests that are seen as a clear threat to U.S. and its allies.
On Friday, North Korea conducted another long-range test flight of a ballistic missile that once again flew over Japanese airspace.
Related: Aerospace ETFs Keep Flying Higher
Further fueling gains in the defense sector, Northrop Grumman (NYSE: NOC) has acquired Orbital ATK (NYSE: OA) for $7.8 billion, CBSNews reports.
NOC shares increased 2.7% Monday while OA shares surged 20.3%.
Orbital manufactures rocket motors that power missiles and designs and produces target launch vehicles used to test missile defense systems. Northrop was recently chosen by the Air Force to continue work designs for a new intercontinental ballistic missile system known as the Ground Based Strategic Deterrent program, and Northrop Chief Executive Wes Bush described Orbital’s capabilities as “very complementary,” reports Samantha Masunaga for the Los Angeles Times.
For more information on the defense industry, visit our aerospace & defense category.