Major US stock market indices traded with a subdued tone in early Thursday trading, even as shares of defence contractors experienced a powerful rally. The surge followed President Donald Trump's announcement of an ambitious plan to significantly increase United States military expenditure.
Defence Sector Gets a "Dream Military" Boost
The focal point of the trading session was the sharp upswing in defence company stocks. This movement was directly triggered by President Trump's stated aim to elevate US military spending to a staggering $1.5 trillion by the year 2027, up from the current approximate level of $901 billion. The President framed this initiative as part of a strategy to build what he termed a "Dream Military."
The market response was immediate and pronounced. Lockheed Martin shares surged by 8.8%, while Northrop Grumman jumped 8.2%. L3Harris Technologies also registered a strong gain of 8%, effectively recouping losses from the previous trading day. However, RTX underperformed its peers with a 3.4% rise. This relatively muted gain came after President Trump publicly criticised the company for being the "slowest in increasing their volume."
In a related development, the President also signed an executive order directing the Pentagon to include clauses in future defence contracts. These clauses would prohibit contractors from buying back their own shares during periods when they are underperforming on government contracts.
Broad Market Indices Show Minor Declines
While defence stocks soared, the broader market landscape was less enthusiastic. According to an AP report, the benchmark S&P 500 index slipped 0.2% in early trading, though it remained close to its recent record high levels. The Dow Jones Industrial Average declined by 109 points, or 0.2%. The technology-heavy Nasdaq composite index fell by 0.4%.
The bond market saw yields edge higher following a set of mixed economic data releases from the United States. While weekly jobless claims rose, indicating a slight increase in layoffs, the numbers were broadly in line with analyst expectations. Separate reports showed stronger-than-anticipated gains in worker productivity and an unexpected narrowing of the US trade deficit for the month of October.
Commodities and Global Market Reaction
Oil prices continued their volatile trajectory, climbing during the session. The US benchmark crude price rose by 2.1% to $57.18 a barrel, while Brent crude gained 2% to reach $61.14 per barrel. Market uncertainty following recent geopolitical events, coupled with ongoing concerns about ample global supply, contributed to the price swings.
Global equity markets mostly trended lower. In Asia, Japan's Nikkei 225 index dropped 1.6%, and Hong Kong's Hang Seng index fell 1.2%. In the US debt market, the yield on the key 10-year Treasury note rose to 4.18% from 4.15% recorded late on Wednesday.
The day's trading highlighted a market sharply divided between sectors directly benefiting from policy announcements and the broader indices grappling with mixed economic signals and global pressures.
