Defense stocks dive, then surge, after Trump calls for record $1.5 trillion defense budget following payout threats
Major defense stocks saw a dramatic V-shaped turn in after-hours trading Wednesday after President Trump called for a record military budget, reversing losses just hours after nosediving on threats to curb industry buybacks and dividends.
The more bullish mood has carried into early trading this morning, with US stocks including Lockheed Martin, Northrop Grumman, and L3Harris Technologies up as much as ~7% as of 6:50 a.m. ET, while Huntington Ingalls Industries, Boeing, General Dynamics, and RTX also made more modest gains. European defense players also hit multi-month highs, with Britain’s biggest aerospace and defense company, BAE Systems, rising more than 6% as investors digested the spending idea.
The surge follows Trump’s proposal for a record $1.5 trillion US military budget for 2027, shared on Truth Social late Wednesday, which he said would help build a “Dream Military” in “very troubled and dangerous times.” The budget would represent a 66% jump from the $901 billion budget authorized for 2026.
Earlier in yesterday’s session, however, defense equities were under pressure — with Lockheed Martin and Northrop Grumman both falling as much as ~5% — after Trump said he would “not permit” dividends or stock buybacks for defense companies until they accelerate equipment deliveries. In a Truth Social post, Trump complained that military equipment was “NOT BEING MADE FAST ENOUGH” — urging executives to build “NEW and MODERN Production plants” while criticizing their pay packages as “exorbitant and unjustifiable.”
This idea was quickly formalized in a White House executive order, which states that “effective immediately,” large defense contractors “are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.” Whether the president has the power to enact restrictions on capital allocation on private companies remains unclear.
The swing in defense shares comes days after the US military’s capture of Venezuelan President Nicolás Maduro, which had buoyed energy and defense stocks as investors price in elevated risk and potential access to Venezuela’s vast oil reserves.
Earlier in yesterday’s session, however, defense equities were under pressure — with Lockheed Martin and Northrop Grumman both falling as much as ~5% — after Trump said he would “not permit” dividends or stock buybacks for defense companies until they accelerate equipment deliveries. In a Truth Social post, Trump complained that military equipment was “NOT BEING MADE FAST ENOUGH” — urging executives to build “NEW and MODERN Production plants” while criticizing their pay packages as “exorbitant and unjustifiable.”
This idea was quickly formalized in a White House executive order, which states that “effective immediately,” large defense contractors “are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.” Whether the president has the power to enact restrictions on capital allocation on private companies remains unclear.
The swing in defense shares comes days after the US military’s capture of Venezuelan President Nicolás Maduro, which had buoyed energy and defense stocks as investors price in elevated risk and potential access to Venezuela’s vast oil reserves.
