Gun stocks soar after Texas massacre
Shares in American guns and ammo manufacturers have skyrocketed in the wake of the Texas massacre for one reason.
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Shares in American guns and ammo manufacturers have skyrocketed in the wake of the Texas massacre.
Springfield, Massachusetts-based Smith & Wesson Brands Inc was up more than 8 per cent from Tuesday’s close of $US13.94 to trade at $US15.12 on Thursday.
Sturm, Ruger & Company Inc, based in Southport, Connecticut, was up nearly 6 per cent, trading at $US67.27 on Thursday after closing at $US63.62 on Tuesday.
And Columbia, Missouri-based American Outdoor Brands Inc has soared by more than 14 per cent, up from $US10.48 on Tuesday to $US11.98 on Thursday.
“US is on cusp of bear market – share prices falling across the board. Except for gun and ammo stocks,” Financial Times associate editor Edward Luce wrote on Twitter.
“Smith & Wesson, Sturm, Ruger & Company, American Outdoor Brands, all surging since Texas massacre.”
Tuesday’s massacre of 21 people, including 19 students and two teachers, at Robb Elementary in Uvalde near the US border with Mexico, has reignited calls for tougher gun control measures.
Salvador Ramos, 18, carried out the country’s deadliest school shooting since Sandy Hook in 2012 using a legally purchased AR-15 style rifle and a handgun.
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‘Gun companies benefit’
Writing on the financial blog Seeking Alpha on Wednesday, investment analyst Saj Karsan noted that the weapons industry faced constant risk of state and federal regulatory action.
But he argued Smith & Wesson shares were “too cheap to pass up”.
“As tragic school and other shootings continue to prematurely end the lives of children and other innocent victims, federal regulations that outright ban gun sales to the public are the biggest risk to this company,” he said.
“These risks cause somewhat counterintuitive behaviour among gun customers. When the risk of regulatory action is high, gun sales tend to rise. Since nationwide legislation on this issue is difficult to pass, this often results in gun companies actually benefiting from higher sales when regulatory risk is at its highest.”
Mr Karsan said last year, high demand and low supply caused dramatic increases in the shares of gun manufacturers.
“For example, Smith & Wesson saw its share price rise some 400 per cent from its Covid lows as manufacturers were able to raise prices and sell everything they had,” he said.
“As one might expect, manufacturers increased capacity and purchases subsided, causing the industry balance to tip towards oversupply. Share prices crashed back down. For example, shares of Smith & Wesson are down 60 per cent from their highs, as dealers work through elevated inventories, causing Smith & Wesson sales to be down some 32 per cent year-over-year in its most recent quarter.”
It came as the National Rifle Association faced criticism for pushing ahead with its annual convention in Texas on Friday.
The powerful gun lobby group issued a statement in the wake of the shooting expressing its “deepest sympathies” and pledging to “redouble our commitment to making our schools secure”.
Former President Donald Trump is slated to headline the event.
Biden calls out ‘gun lobby’
“As a nation, we have to ask, when in God’s name are we going to stand up to the gun lobby?” US President Joe Biden said on Tuesday. “When in God’s name will we do what we all know in our gut needs to be done?”
Mr Biden said since the 2012 massacre at Sandy Hook Elementary School in Connecticut, where a gunman killed 20 children and six adults, there had been “over 900 incidents of gunfires reported on school grounds”.
“I am sick and tired of it,” he said.
“We have to act. And don’t tell me we can’t have an impact on this carnage. I spent my career as a Senator and a Vice President working to pass common sense gun laws. We can’t and won’t prevent every tragedy, but we know they work and have positive impact. When we passed the assault weapons ban, mass shootings went down. When the law expired, mass shootings tripled.”
He was referring to the Federal Assault Weapons Ban (AWB) which ran from 1994 and expired in 2004.
It prohibited the manufacture for civilian use of some semiautomatic weapons as well as certain ammunition magazines that were defined as large capacity.
In the wake of Sandy Hook tragedy, which occurred while Mr Biden was Vice President, President Barack Obama attempted to pass legislation which called on tighter background checks on gun purchases and the restrictions on the sales of certain weapons and ammunition types.
The bill was shot down in the Senate.
Republicans have pushed back on calls for tougher gun control laws in the wake of the latest shooting.
The Second Amendment to the US Constitution prohibits Congress from passing laws that infringe on “the right of the people to keep and bear arms”.
“Inevitably when there’s a murderer of this kind, you see politicians try to politicise it, you see Democrats and a lot of folks in the media whose immediate solution is to try to restrict the constitutional rights of law-abiding citizens,” Texas Republican Senator Ted Cruz told reporters.
Wall Street rallies again
The US stock market has been pummelled in recent weeks amid growing economic headwinds including a looming recession, rising interest rates, soaring inflation, supply chain breakdowns and geopolitical tensions.
A bear market is usually defined as a 20 per cent or more fall from recent highs.
The tech-heavy Nasdaq index is already deep in bear market territory, having lost around 28 per cent this year.
The broader S&P 500 briefly entered a bear market on Friday before recovering its gains at the close.
Wall Street stocks have recovered some of their losses this week, rising for a second straight session on Thursday.
The movies came on a mixed day for global equities, while China’s premier offered an unusually stark warning as the country’s zero-Covid strategy bites into growth.
After a positive session in Europe, the S&P 500 finished Thursday’s session up two per cent, positioning the broadbased US index to potentially snap a seven-week losing streak depending on Friday’s session.
“The market was very oversold, and way overdue to bounce,” Adam Sarhan of 50 Park Investment said shortly before the market closed.
“And what’s happening now, the market is bouncing pretty strong.”
US stocks pushed higher on Wednesday after investors took a positive view of the Federal Reserve minutes, which raised hopes that while the central bank would move aggressively to lift interest rates, it might be able to halt additional rate hikes as soon as this summer if inflation recedes.
Wall Street kept up the positive momentum Thursday following strong earnings reports from a range of retailers including the discount firm Dollar Tree, as well as department store Macy’s and the more upscale Williams-Sonoma.
Besides the strong retailer results, moves by Southwest Airlines and JetBlue Airways to lift their revenue forecasts — another sign of strong consumer behaviour — also boosted the momentum.
Earlier, Asian markets had a mixed session after China’s premier warned of more economic difficulties ahead.
In some ways, the challenges now are “greater than when the pandemic hit hard in 2020”, Premier Li Keqiang told a State Council meeting on Wednesday, according to a readout by the official Xinhua news agency.
“We are currently at a critical juncture in determining the economic trend of the whole year,” Xinhua quoted Li as saying.
China is the last major economy welded to a policy of mass testing and hard lockdowns to eliminate virus clusters, but the strict curbs have battered businesses.
Li’s remarks are the latest in a growing chorus of calls from officials and business leaders for more balance between stopping the virus and helping the ailing economy.
— with AFP
Originally published as Gun stocks soar after Texas massacre
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