DEFENSE STOCKS UP AS US EDGES CLOSER TO SYRIA STRIKE

Last week I explored the relationship between the stock market and the imminent US strike on Syria in response to allegations that the Syrian government recently used chemical weapons against their citizens. At that time the market appeared to be in a holding pattern, evaluating the situation but unwilling to make a move. However a lot has happened in the past week which has clearly influenced investors.

Earlier this week the Senate Foreign Relations Committee voted to give President Obama limited authority to use force against Syria. The resolution would limit strikes against Syrian forces to a period of 60 days, with the possibility of 30 more days after consultation with Congress, and it would block the use of American ground troops.

The vote of 10 to 7 by the Senate Foreign Relations Committee capped a day of fierce debate in both houses of Congress that indicated there is a widespread impulse to respond to the deadly chemical weapons attack but deep divisions over how much latitude the president should have to do so.

The Obama administration said that while they expected the full Senate to vote next week, after Congress returns from recess, they did not think the House would act until the week after and were preparing for a prolonged debate. Senate leaders agreed on Wednesday night to hold a brief session on Friday to put the war resolution on the Senate’s calendar so the clock can begin counting down to a final vote toward the end of next week.

Secretary of State John Kerry argued the Obama administration’s case before the House Foreign Affairs Committee stating that extremist groups fighting against the Syrian government would become stronger if the United States did not carry out a military strike. Mr. Kerry said the United States had worked hard in recent months to persuade Arab nations and benefactors not to finance or arm the more extremist rebels who are battling Mr. Assad’s forces. But if the United States does not punish the Assad government, Mr. Kerry said, it is likely that some Arab supporters of the Syrian opposition will provide arms and financing to the best rebel fighters, regardless of whether they are extremists. “We will have created more extremism and a greater problem down the road,” Mr. Kerry said.

However, most world leaders do not believe that a US attack is the best course of action. UN Secretary General Ban Ki-moon has warned that any military strikes against Syria for an alleged chemical weapons attack are legal only in self-defense or if approved by the UN Security Council. Ban also cautioned nations such as the United States and France that may be considering such strikes that any "punitive" action taken against Syria could unleash more turmoil and bloodshed.

Pope Francis urged the world to abandon the "futile pursuit" of a military solution in Syria. "To the leaders present, to each and every one, I make a heartfelt appeal for them to help find ways to overcome the conflicting positions and to lay aside the futile pursuit of a military solution," Francis wrote in a letter to Russian President Vladimir Putin as the G-20 meeting got under way in St. Petersburg.

Russia opposes any outside military intervention in Syria's civil war and says it suspects the gassings were staged by rebels seeking foreign involvement in the conflict. Putin escalated concerns when he indicated in an interview that his country could send the components of a missile shield to Syria and the region if the U.S. attacks. U.S. Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, testified this week that the Russians might even replace any military assets the U.S. destroys in a strike. This raises the possibility of a "limited" strike on Syria turning into a proxy war between Russia and the U.S.

The United States also claims to have intercepted an order from an Iranian official instructing militants in Iraq to attack U.S. interests in Baghdad in the event the Obama administration launches a military strike in Syria.

China is warning that any military action against Syria will push up oil prices and hurt the world economy. Speaking in St. Petersburg Thursday, Chinese Vice Finance Minister Zhu Guangyao said that "Military action would have a negative impact on the global economy, especially on the oil price - it will cause a hike in the oil price," before citing estimates that a $10 rise in oil prices could push down global growth by 0.25 percent.

Oil prices are largely unchanged in the past week with West Texas Intermediate currently at $108.37 compared to $108.80 last week and Brent Crude currently at $115.26 compared to $115.16 last week.

Aerospace and defense stocks have seen gains over the past week however.

Lockheed Martin (LMT) is currently $124.14 compared to $122.50 a week ago.

52wk high: 126.729

52wk low: 85.88

EPS: 8.92

PE: 13.70

Div Rate: 4.60

Yield: 3.7055

Market Cap: 39.84b

Volume: 1.34m

Boeing (BA) is $106.65 currently compared to $104.00 this time last week.

52wk high: 109.49

52wk low: 69.03

EPS: 5.47

PE: 19.20

Div Rate: 1.94

Yield: 1.819

Market Cap: 80.46b

Volume: 2.59m

Northrop Grumman (NOC) spiked from $92 to $94 earlier this week but has settled to just under $93 currently.

52wk high: 96.4201

52wk low: 62.80

EPS: 8.04

PE: 11.60

Div Rate: 2.44

Yield: 2.608

Market Cap: 21.41b

Volume: 54.39k

General Dynamics (GD) experienced a $2 increase earlier this week and is currently about a dollar higher than last week.

52wk high: 87.85

52wk low: 61.70

EPS: -0.85

PE: N/A

Div Rate: 2.24

Yield: 2.6359

Market Cap: 29.48b

Volume: 78.89k

Raytheon (RTN) shares are also about a dollar higher than last week after seeing an increase of more than $2 earlier in the week.

52wk high: 77.93

52wk low: 52.24

EPS: 5.91

PE: 12.80

Div Rate: 2.20

Yield: 2.9024

Market Cap: 24.28b

Volume: 156.79k

In light of the events and the market movement in these stocks this week it’s apparent which way investors are leaning on the issue. If you haven’t already examined the possibility of adding one or more of these to your portfolio then now is the time to do so.