Defense stocks hit new highs

Sep. 26, 2007 (Thomson Financial delivered by Newstex) —

WASHINGTON (AP) – Defense stocks on Wednesday hit new highs as Defense Secretary Robert Gates requested an extra $42 billion in funding from Congress to cover military costs in Iraq and Afghanistan in 2008.

The AMEX Defense Index, which tracks 14 major defense company stocks, rose 14.25 to a high of 1,686.72 in afternoon trading. Since last year, the index has risen roughly 47 percent, outperforming the broader S&P 500 index, which has climbed nearly 15 percent over the same period.

Although the anticipated request for more funding does not come as a surprise to Wall Street, the Pentagon’s message nevertheless reinforces the idea that defense spending will remain high in the near-term, said Myles Walton, a CIBC World Market Corp. analyst.

Gates and Peter Pace, the soon-to-retire chairman of the Joint Chiefs of Staff, said in prepared testimony before the Senate’s appropriations committee that additional funding will include $11 billion to buy another 7,000 mine-resistant, ambush-protected vehicles on top of the 8,000 vehicles already on order, and $9 billion to provide new equipment and technology.

Among the defense companies likely to benefit from additional wartime spending are: Force Protection Industries Inc., General Dynamics Corp. (NYSE:GD) , Ceradyne Inc. (NASDAQ:CRDN) and Oshkosh Truck Corp. (NYSE:OSK)

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