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Defense stocks fall after Trump calls out F-35 cost overruns

An American pilot exits one of the first two next-generation F-35 fighter jets after it landed during an unveiling ceremony in Nevatim Air Force base near Beersheba, Southern Israel, Monday. (AP/Ariel Schalit)

The stock prices of the top U.S. defense firms fell steadily today after President-elect Donald Trump tweeted that the massive F-35 fighter program's costs are out of control.

Trump suggested that when he takes office, he'll negotiate with defense firms like Lockheed Martin, Northrop Grumman, BAE Systems and Pratt & Whitney to get a better deal for taxpayers on the next-generation aircraft.

Many of the defense contractors involved with building the $379 billion F-35, or Joint Strike Fighter, saw their stocks drop today as a likely result.

From Bloomberg:

Lockheed fell 3 percent to $251.83 at 1:33 p.m. in New York. Northrop Grumman Corp., which is a major supplier to the F-35, and Raytheon Co. at their worst tumbled the most since August 2015. United Technologies, whose Pratt & Whitney unit makes engines for the plane, was little changed. The Standard & Poor’s Aerospace and Defense Index declined 1.2 percent.

By targeting Lockheed, Trump took aim at the world’s biggest defense contractor while serving notice to budget hawks that his administration will pay attention to military cost overruns. The remarks also signaled that the Pentagon’s planned ramp-up of F-35 production this decade isn’t guaranteed.

U.S. defense firms had enjoyed a brief bump after Trump's election in November — a hawkish commander-in-chief tends to improve the fortunes of weapons-builders. However, if Trump focuses on stopping defense firms from making what he considers unfair profits, his presidency could spell bad news for the defense industrial complex.

Many Trump critics pointed out that his hard line on defense profits could be good news for U.S. enemies:

But others had a different perspective.

One last thing…
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