Trump Trade: Defense budget seen as ‘big win’ for defense stocks

Catch up on the top industries and stocks that were impacted, or were predicted to be impacted, by the comments, actions and policies of President Donald Trump with this daily recap compiled by The Fly:

BIG WIN FOR DEFENSE STOCKS: Wells Fargo says early details on the U.S. government’s fiscal 2026 budget request imply Department of Defense spending above expectations and higher than what is currently priced into the stocks. Bloomberg reports the Trump administration will release a “skinny” version of its fiscal 2026 defense budget today, the firm tells investors in a research note. Wells notes the Department of Defense’s top line is clarified at $961B, a 13% year-over-year increase, although this includes some reconciliation bill funds. Assuming $50B of reconciliation included would imply 7% growth and up 4% versus the fiscal 2026 level assumed in last year’s long-term budget outlook the firm adds. “The top-line number is likely a big win for defense stocks today,” contends Wells. Publicly traded companies in the defense space include BAE Systems (BAESY), Boeing (BA), General Dynamics (GD), HII (HII), L3Harris Technologies (LHX), Lockheed Martin (LMT), Northrop Grumman (NOC) and RTX (RTX).

FED RATE: President Donald Trump stated in a post to Truth Social, “Gasoline just broke $1.98 a Gallon, lowest in years, groceries (and eggs!) down, energy down, mortgage rates down, employment strong, and much more good news, as Billions of Dollars pour in from Tariffs. Just like I said, and we’re only in a TRANSITION STAGE, just getting started!!! Consumers have been waiting for years to see pricing come down. NO INFLATION, THE FED SHOULD LOWER ITS RATE!!! DJT” 

TRADE TALKS: China Commerce Ministry said to consider trade talks with U.S. Bloomberg’s Jenni Marsh cites the statement from China’s Ministry of Commerce, which also indicates that U.S. officials have repeated expressed their readiness to enter negotiations with their Beijing counterparts on tariffs, according to the report.

CHIP SALES: The Trump administration is weighing a potential easing of restrictions on Nvidia (NVDA) sales to the United Arab Emirates, Mackenzie Hawkins, Ben Bartenstein and Ryan Gould of Bloomberg report, citing people familiar with the matter. President Trump could announce the start of work on a bilateral chip deal during his upcoming trip to the Gulf, sources told Bloomberg. The debate over semiconductor trade rules remains ongoing, but talks over modifying AI chip curbs for the UAE have been gaining steam at both the Commerce Department and the White House, said the people. 

STOCKING UP AHEAD OF TARIFFS: Amazon (AMZN) tried to temper concerns about the impact of the Trump administration’s tariffs on its business, but the company has few options to ensure small third-party sellers stay put in the face of the levies, Reuters reports. The company has not seen any “attentuation of demand yet” nor much of an increase in average selling prices of retail items, which is likely the result of third-party sellers stocking up to mitigate tariffs impact. However, this is a short-term solution and, as sellers sell through their inventory, they will struggle to avoid price increases. 

LOCAL FULFILLMENT MODEL: PDD’s (PDD) Temu is shifting to a “local fulfillment” model, selling only goods from local U.S. merchants to American consumers, to avoid tariffs and keep prices unchanged, Bloomberg reports. The move is designed to help local merchants reach more customers and grow their businesses, and is part of Temu’s ongoing adjustments to improve service levels. Temu’s shift comes as retailers face soaring import taxes and the scrapping of the de minimis tariff exemption for small parcels, which has led to price increases for U.S. consumers. Temu rivals offerings from Amazon and Alibaba (BABA). 

LAW FIRMS SWAP: In a case related to its Activision acquisition, Microsoft (MSFT) dropped a law firm that settled with President Trump in favor of Jenner & Block, a firm that is fighting a Trump executive order, The New York Times’ Noam Scheiber reports. Microsoft has declined to comment on why it changed law firms in a significant case last week, but the switch suggests that a firm that chose to fight the Trump administration could still attract an important client. 

GOLD FOR BITCOIN: The Trump administration is finalizing a plan to sell gold from Fort Knox to buy bitcoin for a new created U.S. strategic reserve, investor Mike Alfred reported via X, citing sources. Alfred is the Founder and Managing Partner of Alpine Fox and serves on the board of bitcoin miner IREN (IREN).