Rumsfeld's Resignation Sparks sell off in Defense Contractors' stock

[Bman]

LOL..

what does that tell you?? No more sweetheart no bid deals.. No more "cost plus" contracts with no oversight whatsoever. Defense contractors might be now subject to "audits" without "The Don" on the inside paying off the cops.


Morning Star

November 10, 2006 Friday

World - Rumsfeld shock sends arms shares plummeting


The resignation of US Defence Secretary Donald Rumsfeld on Wednesday contributed to a decline in the shares of military contractors.

With Democrats taking control of the US House of Representatives and looking to rein in military spending, the largest US military contractor, Lockheed Martin, was one of the biggest losers, shedding $1.06 to close at $84.85 on the New York Stock Exchange.

Prudential Equity Group LLC said: "The bigger issue is what change means to US strategy in Iraq and global war on terror."

"We stand by our belief that the 2007-2008 outlook for defence stocks is not as silky smooth and that new defence policies and strategies should emerge."

The decline in defence stocks was broad, with arms manufacturer General Dynamics, combat communications systems maker Raytheon and government services company Halliburton all falling into negative territory.

Even if Republicans maintain control of the Senate, Arizona Senator John McCain, who is a frequent critic of expensive defence programmes, is expected to take over as chairman of the Senate armed services committee

[Bman]

The Associated Press

November 9, 2006 Thursday 12:31 AM GMT


With Democrats in control of House, scrutiny likely to grow on drugs, defense industries

By BRAD FOSS, AP Business Writer

WASHINGTON



The new masters of the House, the Democrats, are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.

California Rep. Nancy Pelosi, who is in line to become speaker, has promised to fight early on in the next Congress to lower the price of prescription drugs available through Medicare. Efforts to curb military spending are also likely, political and financial analysts said, following an election whose outcome was influenced in large part by voters' dissatisfaction with the handling of the war in Iraq.

But with the two parties stalemated in the Senate, where it usually takes 60 votes to pass major legislation, the pharmaceutical and defense industries may find themselves beset more by unwelcome rhetoric in Congress than any hurtful changes in law.

To be sure, few major changes in corporate America are expected to result from Democrat-led initiatives over the next two years with the exception of a proposed increase in the minimum wage that may get substantial Republican support.

The long-term outlook for companies in the biotechnology and homeland security businesses may benefit, analysts said, from anticipated Democratic efforts to promote stem-cell research and inspect more cargo containers at ports. And the alternative energy sector could also get a boost.

But heightened scrutiny of other sectors, ranging from drugs to defense to hedge funds, could darken their prospects on Wall Street.

"The drug industry is on the top of the list of industries that would be uncomfortable if Democrats are successful in the elections," said Ira Loss, an analyst at Washington Analysis.

That's because Pelosi has promised legislation that would allow the government to negotiate directly with drug companies to purchase medicines for Medicare, a process the drug industry equates to price controls.

Shares of Pfizer Inc. fell 43 cents Wednesday to close at $26.62 on the New York Stock Exchange, where shares Eli Lilly & Co. declined by 50 cents to $56.48. Shares of Merck & Co. fell $1.56 to finish at $44.34, mostly because of Merck's disclosure late Tuesday that liabilities from tax disputes could total $5.58 billion.

The Dow Jones industrials rose 19.77, or 0.16 percent, to 12,176.54. The blue chips closed above the record of 12,167.02 set on Oct. 26 and came within a few points of a record trading high of 12,196.32 reached Tuesday.

Broader stock indicators also advanced. The Standard & Poor's 500 index was up 2.88, or 0.21 percent, at 1,385.72, and the Nasdaq composite index rose 9.06, or 0.38 percent, to 2,384.94.

Pelosi has pledged that Democrats would move to raise the minimum wage a policy change that could affect fast-food restaurants such as McDonald's Corp., as well as other retailers.

Ballot measures that mandate increases in existing state minimum wage laws passed in Arizona, Missouri and Montana, among other states. Alaska voters, meanwhile, helped protect the pockets of Big Oil by shooting down a proposal to increase drillers' taxes by $1 billion a year.

Generally speaking, Democrats have said they will differ from Republicans by being tougher watchdogs of corporate wrongdoing and government spending and bigger defenders of consumers and labor unions.

Still, "there are not going to be wholesale changes in economic policy" because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market's recent strength, according to Wachovia Securities economist Mark Vitner.

One way Democrats can assert themselves is by spoiling the prospects for renewal of President Bush's tax cuts, said Kevin Hassett, the director of economic policy studies at the American Enterprise Institute and an adviser to President Bush's 2004 re-election campaign.

However, lobbyists said they do not expect the intense partisanship that defined recent campaigns to last very long.

Sure, the Democrats will want to distinguish themselves from the Republicans early on by shifting the emphasis in energy policy from, say, increasing the supply of oil to reducing the demand for it. But pragmatism and an eye toward the 2008 presidential election will naturally pull both parties closer to the center, these lobbyists said.

"Nancy Pelosi is very shrewd," said Jay Timmons, senior vice president of policy at the National Association of Manufacturers. "She's going to want to build a majority that lasts more than two years and the way to do that is to reach out to nontraditional allies."

That is not to say Democrats, who will now be in charge of all 21 House committees, do not have plans to shake up business as usual after a dozen years in the minority.

"The debate will shift dramatically from the first day," said Bill Samuel, legislative director of the AFL-CIO.

Technology companies such as Intel Corp. and Hewlett Packard Co. will be focused on the Education and the Workforce Committee, likely to be led by Rep. George Miller, D-Calif., as they push to increase the annual cap on H-1B visas used to attract engineers and other workers to Silicon Valley. Many in the industry say visa reform has been unfairly stalled by Republicans amid the battle over illegal immigration.

Rep. John Dingell, D-Mich., who will take charge of the House Energy and Commerce Committee, said he would push for stiffer enforcement of environmental violations and tougher energy efficiency standards for home appliances. But he steered clear of promoting higher automobile fuel efficiency an issue strongly opposed by Detroit automakers.

Rep. Barney Frank, D-Mass., who will chair the Financial Services Committee, has said building more affordable housing is at the top of his agenda, and Wall Street seems to be listening.

Companies in the government-sponsored mortgage space advanced on Wednesday. Shares of Fannie Mae climbed $1.75 to close at $61.94, while Freddie Mac gained $1.37 cents to $71.23.

With many political analysts viewing the Democrats' win of the House as evidence of waning support for the war in Iraq, some investors are bracing for the possibility that military spending may gradually slow.

Even if Republicans manage to maintain control of the Senate the outcome was still unclear Wednesday afternoon Arizona Sen. John McCain, a frequent critic of free-spending defense programs, is expected to take over as chairman of the Senate Armed Services Committee.

Shares of Lockheed Martin Corp. dropped $1.04 to end at $86.45 on the NYSE, where defense contractor Raytheon Co. declined by 72 cents to $48.96.

Companies in the stem-cell sector showed gains after voters in Missouri narrowly approved a referendum guaranteeing federally approved stem-cell research and treatment will be available in the state. StemCells Inc. rose 32 cents, or 10.42 percent, to settle at $3.39 on the Nasdaq Stock Market, where Geron Corp. rose 28 cents to $8.66.

Associated Press Writers Theresa Agovino, Paul Elias, Marcy Gordon, Stephen Manning, Scott McFetridge, Bruce Meyerson, Tim Paradis, Eileen Powell, Jordan Robertson, Ellen Simon and Alex Veiga contributed to this report.

[Rab1dluc1d1ty]

Of Course, now that Dems are in power, we won't need a military...

[keith]

It might be a bit of over reaction, the big Defense firms have many on both sides in their pockets, and probably plenty of dirt on them, too.

[freeman]

Rap...

I guess you fail to see the benefits of not needing an army?

Of course the feeble minded think Military action is the answer to everything...when history has proven hundreds of time and over thousands of years that there has "never" been a successful military occupation.

Solid mahogany head, i bet it gets really heavy after your shower.

[emtae]

Yeah, buy on a dip!