What to watch

North Korea crisis puts focus on defense stocks

The saber-rattling between the U.S. and North Korea hasn’t been great for the stock market, but it has provided a boost to shares of American defense stocks.

The war of words between Pyongyang and President Trump has Wall Street worried about the possibility of an armed conflict. As a result, investor dollars are flowing into shares of defense contractors such as Lockheed Martin, a stock which saw its eight-session win streak snapped Thursday, Northrop Grumman, which fell for the first time in seven sessions, as well as Boeing, Raytheon and General Dynamics.

“Escalating tensions with North Korea is lifting defense stocks,” says Andrea Kramer, analyst at Schaeffer’s Investment Research in Cincinnati.

On Monday, Morgan Stanley’s aerospace and defense analyst Rajeev Lalwani started coverage on the defense industry, giving it a “favorable outlook.”

In the report, titled “The Run Isn’t Over,” he said the “allure” of defense stocks such as Lockheed Martin and Raytheon — which he gave “overweight” ratings to — is due to larger government defense budgets and “persistent global threats” that help drive sales earnings.

Lockheed Martin, which makes the Black Hawk helicopter and F-35 Lightning II fighter jet, had rallied more than 4% in its eight-day win streak before giving back 0.7% Thursday. Northrup Grumman, which had risen six sessions in a row, dipped 0.9% Thursday.