Aerospace ETF Hit by Mixed News

Aside from the positive earnings report from Boeing (BA - commentary - Trade Now), it seems like in recent months the companies making up the PowerShares Aerospace & Defense (PPA - commentary - Trade Now) index can't catch a break.

Late in June top-holding Boeing announced another delay on its much anticipated Dreamliner jet, causing its stock to drop 6.5% in one day. This week, the negative news is coming from the PPA's number three holding, Lockheed Martin (LMT - commentary - Trade Now).

On Tuesday The Wall Street Journal reported that in a 58 to 40 vote the Senate agreed to remove an amendment to the 2010 Pentagon budget added by the Armed Services Committee. This amendment set aside $1.75 billion for the purchase of seven F-22 Raptor aircrafts for the Air Force. These jets, originally designed for combat during the Cold War, are manufactured by Lockheed Martin.

Defense Secretary Robert Gates said the jets were a poor purchase considering the type of war being waged in Iraq and Afghanistan. President Obama supported the decision, saying that ordering the aircrafts would be a huge waste of money and would take away funds from more urgent wartime needs.

Lockheed had a tough day on Wall Street with this news as well, as its earning report stated that the company had its second straight quarter of losses. This negativity led to an 8.50% drop for Lockheed by the end of trading Tuesday. PPA remained relatively unchanged on the news and closed Tuesday down about 0.28%.

The recent bipolar news coming from the companies making up the ETF's top holdings is likely to lead investors on a rocky road in the near future. However, it will be interesting to see if the recent positive news from Boeing can offset the less-than-ideal press coming from other areas of the aerospace and defense sector.

Know What You Own: Other aerospace and defense names that might interest investors include Northrop Gruman (NOC - commentary - Trade Now), General Dynamics (GD - commentary - Trade Now), Raytheon (RTN - commentary - Trade Now) and Alliant Techsystems (ATK - commentary - Trade Now). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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At the time of publication, Dion had no positions in the stocks mentioned.

Don Dion is the publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.