RTX - Defense spending in focus as Turkey casts doubt on Sweden's NATO bid

Turkey has issued fresh threats to block Sweden's bid to join NATO after a far-right politician publicly burned a copy of the Quran in Stockholm over the weekend.

"If you speak about freedoms and rights, then first things first, you should show respect to the religious belief of Muslims and Turkish people," President Recep Tayyip Erdogan said in televised remarks. "If you do not show such respect, then you cannot see any kind of support from us on NATO."

"Of course I am against the kind of behavior that we have seen on the streets of Stockholm," replied NATO Secretary General Jens Stoltenberg, "but this is not something that is illegal and freedom of speech is a very precious right."

Some see the tough talk as a way for Erdogan to shore up support ahead of the country's upcoming elections in May, though he has also demanded a broader crackdown against Kurdish separatists, the extradition of suspected terrorists and the strengthening of counterterrorism laws. 28 of NATO's 30 members have already approved Sweden and Finland's application for membership, while Hungary will send the matter to parliament for ratification early this year.

A military buildup could be another boon for defense stocks, though the latest rhetoric - combined with the possibility for cuts to U.S. defense spending - isn't spelling good news for the sector that outperformed in 2022. All current 30 NATO nations have also agreed to spend at least 2% of their GDPs on defense by 2025, though only a third of those members have met the threshold. Wells Fargo explores how cuts in federal spending could hit defense stocks

There is additional speculation that the U.S. could force Turkey's hand via an F-16 jet purchase from Lockheed Martin ( NYSE: LMT ), which is set to report Q4 earnings before the bell on Tuesday ( see the full preview here ).

Related: Northrop Grumman ( NYSE: NOC ), General Dynamics ( NYSE: GD ), L3Harris Technologies ( NYSE: LHX ), Leidos ( NYSE: LDOS ), Boeing ( NYSE: BA ), Raytheon ( NYSE: RTX ), Textron ( NYSE: TXT ), Kratos ( KTOS )and Aerojet Rocketdyne ( NYSE: AJRD ).

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