Defense Stocks Rise as Orders Surge

Aerospace and defense company stocks surged after a government report said industry orders in February increased 35%.

The gains were led by Hawk(HWK Quote), which jumped 15%, and Raytheon(RTN Quote), which spiked 7.7%. Northrup Grumman(NOC Quote) has risen 18% in the past five trading days, the most of the group, which also includes Lockheed Martin(LMT Quote), Goodrich(GR Quote) and Boeing(BA Quote).

Concern about a defense-budget freeze hurt the outlook for aerospace and defense stocks toward the end of 2008. But yesterday's durable-goods report revealed a 3.4% increase last month, the biggest gain in more than a year and the first in seven months.

Some investors expect consolidation in the industry after prices fell to the lowest levels in more than a year. Analysts are predicting a round of acquisitions in the weeks ahead and expect small and mid-sized firms to become attractive targets for larger players seeking niche technologies.