Euphoria in U.S. defense stocks 🗽 An additional $500B for Department of War?

Yesterday, Donald Trump’s comments delivered a real rollercoaster ride for U.S. defense stocks. After an initial sell-off, with names like Lockheed Martin (LMT.US) and RTX Corp (RTX.US, formerly Raytheon) down by several percent, amid Trump's criticism on Truth Social the giants surged by as much as 5% or more shortly after the cash session closed. Today, gains are broad across the sector, from major primes to smaller defense players. What happened?

• At first, the U.S. President said he would not allow the largest defense contractors to pursue dividend-heavy policies and expensive share buybacks, instead pushing them to invest in building next-generation weapons manufacturing facilities.
• Investors viewed this type of intervention as a meaningful operational risk for the companies, a potential hit to their shareholder-return model, and a signal of higher capital expenditures (CapEx) that could weigh on profits.
• About an hour later, Trump added that thanks to revenue from trade tariffs, the U.S. defense budget in 2026 should reach USD 1.5 trillion, rather than USD 1 trillion as previously planned. That comment triggered an immediate reversal, with defense stocks quickly recovering their losses.
• Earlier, Trump had also pointed to RTX Corp, describing it as the contractor most reluctant to implement the U.S. Department of War’s suggestions, choosing instead to maintain an inflated dividend and buyback policy. This contributed to additional downside pressure in the stock. Those losses have now been more than reversed, and ahead of the U.S. open the shares are up nearly 5%, trading around USD 194 per share.

RTX Corp (RTX.US), H1 timeframe

Source: xStation5