I had actually been planning to attend the Route 91 Harvest festival in Las Vegas this year.

On Monday morning, after filling up my ritualistic morning cup of coffee, I trudged to my chair and turned on the news. Like many other Americans that morning, what I saw on the television completely numbed me.

Prior to that morning, I’d been feeling pretty letdown that life had gotten in the way of me booking the trip to Las Vegas for the music festival.

And so, a strange cocktail of emotions washed over me after hearing the breaking news. On one hand, I was grateful to be safe at home, knowing all too well that I could have been caught right in the middle of the chaos. On the other hand, I began frantically calling and texting the friends and family members whom I knew were there, praying that they were all safe and unharmed as the newscaster increased the casualty count by the minute.

The horrific events from that night have been dubbed “the deadliest shooting in modern U.S. history,” with one lone gunman killing 59 people and injuring over 500 more.

The gunman, identified as 64-year-old Stephen Paddock, had opened fire from his 32nd-floor hotel room above the packed outdoor concert venue, prompting the unimaginable chaos that ensued as the panicked crowd scrambled for safety.

Clark County Sheriff Joe Lombardo said that Paddock had been found dead by the officers who stormed his room at the Mandalay Bay Resort and Casino.

Even days after, police are still no closer to identifying Paddock’s motives for causing such mass death and destruction.

But as family and friends begin grieving, their lives irreversibly changed, the shareholders of some major gun manufacturers are finding a silver lining through the smoke of the massacre.

The Markets Early Monday Morning

The markets reacted rather sharply early Monday morning in the wake of the Las Vegas mass shooting.

All three major indexes climbed to new record highs…

• Dow: 22,557.60, +152.51, (+0.658%).

• S&P 500: 2,529.12. +9.76, (+0.39%).

• Nasdaq: 6,516.72, +20.76, (+0.32%).

And the biggest players in this upswing were gun stocks. Shares of major gun manufacturers tend to rally after mass shootings, which have sadly become more and more routine…

• Sturm, Ruger & Company, Inc. (NYSE: RGR): Up $2.65 (5.1%) to $54.35 per share.

• American Outdoor Brands Corporation (NASDAQ: AOBC), formerly Smith & Wesson: Up $0.71 (4.7%) to $15.96 per share.

• Olin Corporation (NYSE: OLN), owners of the Winchester Ammunition: Up $2.27 (6.63%) to a new record high of $35.72 per share.

• Vista Outdoor Inc. (VSTO): Up 1.4% to $23.38 per share.

This is due, in part, to heightened political conversations about gun control legislation and also to the rising speculation that people would want to buy firearms for protection before any more regulations are put in place.

Quincy Krosby, chief market strategist at Prudential Financial, made the following statement regarding the rallies that gun stocks experience after shootings:

The market always has an instinctive reaction to event and more and more it’s algorithmically induced.

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.

These attacks, which are becoming too common, too regular and a seemingly inherent part of our cultural landscape have potential buyers of guns wondering if they would be more difficult to buy, or even outlawed.

Similarly, after the Orlando, Florida, and San Bernardino, California, shootings, we saw a two- to three-month surge in firearms sales. “[The two ISIS-linked attacks] certainly triggered something in the American consciousness about personal safety,” says Rommel Dionisio, managing director at Aegis Capital.

On the other hand, casino and hotel stocks crumbled…

• MGM Resorts International (NYSE: MGM), owner of the Mandalay Bay hotel from where the gunman opened fire: Down $1.08 (3.3%) to $31.51 per share.

• Wynn Resorts, Limited (NASDAQ: WYNN): Down $0.71 (0.5%) to $148.31 per share.

• Las Vegas Sands Corp. (NYSE: LVS): Down $0.08 (0.1%) to $64. 08 per share.

Although many casinos and hotels fell early Monday morning, many of them saw a reversal later on in the day.

The Logic and the Moral Issue

The logic behind gun stocks rallying after a mass shooting like Las Vegas is this: There will be a backlash on Capitol Hill as many lawmakers demand tighter gun control regulations in order to prevent such tragedies in the future.

These discussions will instill fear in many gun owners, causing them to believe that their window for buying their favorite deadly weapons is about to close. So, they’ll go out and stock up on them in the meantime. Many who worry that they don’t have the firepower to protect themselves in a nightmare scenario may also rush out to buy guns, too.

This rationale is borne in the numbers. Short-term bumps in firearm sales followed mass shootings in San Bernardino, California, in 2015 and at the Pulse Nightclub in Orlando, Florida in 2016.

On the other hand, the moral issue is this: Making money from a national tragedy, one that ruins untold numbers of lives and irrevocably alters many more, feels wrong on its own.

Most people would feel little solace if, per say, they’d had some puts on the S&P 500 that ended up making them money in the wake of the events of September 11, 2001, when stocks plunged following the attacks.

With the disconcerting regularity that mass shootings occur within the U.S., gun stocks are more or less guaranteed to have a few of these rallies each year.

But with the violent talks about varying degrees of gun control already consuming Washington, the news media, and popular social media platforms, guns stocks may see more aggressive movements in the coming weeks.

The Bottom Line

Despite the vehemence coming from each sociopolitical side, gun control technology already exists, but it does not house the power to prevent future mass shootings.

More laws will do nothing but congest our already scrambled government.

There are already numerous laws in place that forbid murder, but they did nothing to stop Paddock’s attack on innocent concertgoers in Las Vegas.

But I’m not here to pose solutions or to transform this into a political conversation.

Just adding my two cents…

That’s all for now.

Until next time,

John Peterson
Pro Trader Today