Aerospace and Defense Stocks Flirt With Worst Week in Years

(Bloomberg) -- Uncertainty is taking a toll on the aerospace and defense sector as tariffs, talks of a trade war and personnel shuffling in the White House pressure stocks.

The S&P 500 Aerospace & Defense Industry Index fell for the third day, widening its retreat to as much as 5.1 percent this week through the gauge’s lowest reading on Wednesday. The index pared some losses, but that would put it on pace for its worst week since August 2015 when concern about China devaluing its currency rippled through global equities and sent the index down by 5.7 percent.

This year the concern is that President Donald Trump’s aluminum tariffs will crimp profit margins of an industry that heavily relies on the metal. And adding to the woes is a recent White House personnel upheaval. The appointment of Mike Pompeo as the new Secretary of State raised concern that the administration may take a harder stance on national security and trade, hurting the industry that relies on foreign markets for a sizeable amount of revenue.

“There are quite a bit of uncertainties, and traders want to take chips off the table,” said Stephen Carl, head trader at Williams Capital Group. “It’s a confluence of things: there is a lingering concern about tariffs, and the uncertainty that the new members of the White House will have a tougher stance on trade, which doesn’t bode well for the industry group.”

Boeing Co., the top performing stock in the index over the past year, was among the biggest losers on Wednesday, sinking as much as 4.8 percent after its biggest supplier, Spirit AeroSystems Holdings Inc., said the company is working through a tough quarter to meet demands of Boeing’s increased 737 production. The $5.8 billion iShares U.S. Aerospace & Defense ETF sank 1.1 percent as it fell below its 50-day moving average, compared with a 0.6 percent loss in the S&P 500 Index.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Sebastian Silva, Will Daley

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