The deadly shooting at a Las Vegas concert, which took at least 58 lives and injured 500 or more, is the deadliest mass shooting in modern U.S. history.
The move higher in gun stocks is due to the perception that there is bigger potential for tighter gun controls, as well as a belief that gun buying will pick up as Americans look to better protect themselves, says Gary Kaltbaum, president of investment firm Kaltbaum Capital Management.
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Gun stocks had been struggling since President Trump was elected, as investors bet that the new administration would push less hard on legislation to increase restrictions on gun sales. Storm Ruger, for example, fell more than 14% the day after Trump was elected. The stock was up about 2% in 2017 through the end of September. Shares of American Outdoor Brands were down 28% in the first three quarters of this year.
Last year the board and shareholders of Smith & Wesson, which makes and sells pistols, revolvers and rifles, voted to change the name of the company to American Outdoor Brands, which CEO James Debney said at the time better "represents" the company's "growing array of brands and businesses in the shooting, hunting and rugged outdoor enthusiast markets." The corporate name change and new stock symbol went into effect Jan. 3., the first day of trading in 2017.
A gunman opened fire from a hotel room above a packed, outdoor concert in Las Vegas, prompting chaos as the panicked crowd scrambled for cover or simply ducked to avoid the onslaught.
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Clark County Sheriff Joe Lombardo said the shooter, identified as Stephen Paddock, 64, was found dead by officers who stormed his 32nd-floor room at the Mandalay Bay Resort and Casino. Lombardo did not directly address the issue of terrorism but described Paddock as "a distraught person intent on causing mass casualties."
Shares of MGM Resorts International (MGM), which owns the Mandalay Bay Resort and Casino, fell $1.50, or 4.6%, to $31.09. Investors sold the stock amid fears that future bookings could be hurt due to safety concerns.
Rival hotel companies did not suffer as massive selling. Wynn Resorts (WYNN) fell $2.93, or 2%, to $146.00. The company has two properties on the Las Vegas Strip, the Wynn Las Vegas, and the Encore at Wynn Las Vegas.
And shares of Las Vegas Sands (LVS), which has a convention center in Las Vegas as well as two hotels — the Venetian and the Palazzo — were off just 10 cents, or 0.2%, to $64.06.
It is not uncommon for shares of gun makers to rise after high-profile shootings, and oftentimes the initial price moves are sparked by computer-driven trades that buy on the news.
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Gun stocks have historically risen more than the broad stock in the month after a mass shooting, according to a CNBC analysis of 32 mass shootings since April 1999. Sturm Ruger shares were up 2.89% on average a month later, and the then-Smith & Wesson was up 5.36%, vs. a 1.66% rise for the Standard & poor's 500 stock index.
"The market always has an instinctive reaction to events and more and more it's algorithmically induced," says Quincy Krosby, chief market strategist at Prudential Financial.
"Traders believe that people will go out to buy guns for self protection; perhaps those who have been thinking about it but who have been debating the merits of the purchase," says Krosby.
"These attacks, which are becoming too common, too regular and a seemingly inherent part of our cultural landscape," she adds, "have potential buyers of guns wondering if they would be more difficult to buy, or even outlawed."
Contributing: Jane Onyanga-Omara and John Bacon