Latest Ukraine Aid Package Provides $1.7 Billion Directly To Defense Contractors

The United States is preparing to send over a new round of $2 billion in military aid and defense equipment to Ukraine to help fend off Russia's invasion. The latest round provides a $1.725 billion direct boost to U.S. defense contractors like Boeing, General Dynamics and Raytheon. It is the first package to include tanks and long-range arms.

Officials say $1.725 billion of the aid package will come from the Ukraine Security Assistance Initiative (USAI) fund, according to Reuters. USAI funds allow the White House to provide weapons directly from industry manufacturers. Weapons are typically sourced through Pentagon inventories.

New Ukraine Aid

The new package includes a Ground Launched Small Diameter Bomb (GLSDB) produced by Boeing. The GLSDBs have a 94-mile range. That will allow Ukraine to counterattack by hitting targets behind enemy lines. It's the first time the U.S. will send over long-range glide bombs, Reuters reported. However, U.S. officials denied Ukraine's request for Army Tactical Missile System (ATACMS). Those missiles are manufactured by Lockheed Martin.

The USAI funds will also pay for components of HAWK air defenses and Puma drones, made by Raytheon and AeroVironment, respectively. Counter drone systems, counter artillery and air surveillance radars, communications equipment and parts for Raytheon's Patriot surface-to-air missile system may also be included.

On Jan. 25, the Biden Administration announced it will provide Ukraine with 31 M1 Abrams tanks, manufactured by General Dynamics. The support will equip an entire Ukraine tank battalion, according to the Department of Defense. Germany is also sending over Leopard 2 tanks. The United Kingdom is sending Challenger 2 tanks. And France will provide AMX-10 armored fighting vehicles as part of the international backing.

Defense Stocks Consolidating

Among defense stocks, Boeing has been trading very flat after a 21% rally following a November breakout. The stock is riding short-term support at its 21-day exponential moving average. A move above 216.74 would present an aggressive follow on entry.

Heico is in a buy range after clearing a 165.89 entry. Raytheon is consolidating, attempting to climb back above support at its 50-day moving average.

LMT stock is basing after a rebound from support off its 200-day moving average. General Dynamics is caught below resistance at its 200-day line.

Justifying Fighter Jet Support

Ukraine is lobbying for additional air support in the form of F-16 fighter jets after confirming the tank deals. President Volodymyr Zelenskyy says Ukraine needs them to defend against Russian missile and drone attacks. However, the U.S. and allies have avoided sending over the Lockheed Martin and General Dynamics-made jets. It cites rigorous training requirements and Russia's extensive anti-aircraft systems. While the larger picture is that the U.S. and allies are being careful to avoid any impression of engaging in direct conflict with Russia.

You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison