Judging by Defense Stocks, Boston Attacks Won't Lead to War

Boston Marathon bombing
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It doesn't look like investors think that the attack in Boston is a prelude to war.

In the aftermath of the bombing at the Boston Marathon, investors did not bid up defense stocks such as Northrop Grumman, Lockheed Martin, General Dynamics, Raytheon or Honeywell Intenational. All these stocks moved right along with the broader indexes.

This looks like an indication that the market does not consider this a 9/11-type event that will lead the United States into war. The September 11 attacks led to much more defense spending—and provided a major boost to companies such as Lockheed Martin.

Defense stocks have been beaten down this year, thanks in part to the federal budget sequester. The sequester requires the federal government to reduce expenditures by about $85 billion, roughly half of which is to come out of defense spending.

Many recently got a boost, however, when the White House proposed a budget with much smaller cuts to defense, on the order of just $3.9 billion.

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