New York, Jan 8, 2026, 06:16 EST — Premarket
- Lockheed Martin up 7.2% and Northrop Grumman up 7.5% in early premarket after Trump’s 2027 budget call
- Rally follows Wednesday’s drop on an executive order targeting dividends and stock buybacks at underperforming contractors
- Traders eye Friday’s U.S. payrolls report and early signals on how the Pentagon will enforce the new rules
U.S. space and defense stocks jumped in early premarket trade on Thursday after President Donald Trump called for a $1.5 trillion military budget for 2027, with Lockheed Martin up 7.2% and Northrop Grumman up 7.5%. RTX gained 4.9% and Kratos Defense rose 7.1%, even as Dow, S&P 500 and Nasdaq futures fell about 0.2%-0.3% heading into Friday’s payrolls report. Jefferies economist Mohit Kumar warned that a shift toward more government intervention could “create uncertainty” and add to some risk premium. Reuters
The bounce followed a sharp Wednesday selloff after Trump vowed to block dividends and stock buybacks — when companies repurchase their own shares — at major contractors until they speed up production and fix contract problems. Lockheed ended down 4.8% and Northrop fell 5.5% in regular trading after Trump’s posts, and his executive order set a 30-day deadline for the Pentagon chief to name underperformers and demand remediation plans. Reuters
Trump’s budget target would lift planned U.S. military spending from the $901 billion Congress approved for 2026, but it still needs lawmakers’ signoff. Byron Callan of Capital Alpha Partners said the headline number leaves investors guessing where the money would go and whether the defense sector can absorb it. The Committee for a Responsible Federal Budget estimated the plan would cost $5 trillion through 2035 and add $5.8 trillion to debt with interest, while noting a Supreme Court ruling could undercut tariff revenues Trump said would fund the increase. Reuters
The White House said Trump’s order directs the Secretary of War to identify contractors that underperform or fail to invest in production capacity while spending on buybacks or corporate distributions. It also calls for future contracts to curb payouts during periods of underperformance, tighten executive pay terms and asks the SEC chair to reconsider safe-harbor protections for underperforming defense contractors. The White House
Trump also took aim at RTX’s Raytheon unit, saying the Department of War had told him it was “least responsive” and warning that further U.S. government work would come with no additional stock buybacks. Reuters
Contractors, for their part, have been talking up capacity. Lockheed said on Tuesday it reached a seven-year agreement with the U.S. Department of War to lift annual production capacity for its PAC-3 Patriot interceptor missiles to 2,000 units from about 600, as demand rises for air defense systems among the U.S. and its allies. Reuters
The policy churn has also been echoing overseas. Europe’s aerospace and defense index hit a fresh record on Thursday, led by BAE Systems, after Trump’s budget comments and the U.S. payout clampdown. “Geopolitics is the inescapable story of 2026 thus far,” Saxo Bank strategist Neil Wilson said, while Investec analyst Ben Bourne warned the U.S. restrictions could nudge some investors toward UK defense names with high U.S. exposure. Reuters
Not every space-linked name is riding the same wave. AST SpaceMobile slid 12% on Wednesday after Scotiabank analyst Andres Coello downgraded the stock to Sell and set a $45.60 price target, flagging valuation risk even as defense primes rallied on the budget headline.
But traders say the rebound rests on moving targets — whether Congress will back Trump’s $1.5 trillion number, and how quickly the Pentagon and regulators translate the payout crackdown into enforceable contract and market rules. Next up is Friday’s U.S. nonfarm payrolls report for December (Jan. 9), a key data point as economic releases normalize after the government shutdown, and a potential spark for the next leg in risk appetite.
