Gun stocks jump after Las Vegas mass shooting

In the wake of Sunday night's terrible shooting at the Mandalay Bay Hotel in Las Vegas, gun makers are certain to come in for searing public criticism. They're also due for something else: a jump in stock prices.

Yet gun stocks began climbing as soon as the market opened Monday, with shares of Sturm Ruger rising 4.7% in early trading. American Outdoor Brands, formally known as Smith & Wesson, was also up 4.5%.

The gains in the gun stocks apparently came as traders bet on a pickup in arms sales ahead of potentially tighter regulations as a result of the shooting. They may also be betting sales increase as consumers look to more heavily arm themselves for protection in the wake of the shooting.

The attack at a Las Vegas concert, which took at least 59 lives and injured more than 500 people, is the deadliest mass shooting in modern U.S. history.

After the Orlando, Florida, and San Bernardino, California, shootings, "you saw a two- to three-month surge in firearms sales," said Rommel Dionisio, managing director at Aegis Capital. The two ISIS-linked attacks "certainly triggered something in the American consciousness about personal safety."

The dynamic works something like this: Mass shootings inevitably lead to public calls for gun control. Those calls typically go nowhere in Washington, but they do appear to motivate gun lovers—who tend to buy new guns, and sooner rather than later, lest the government somehow succeed in curtailing gun sales. Under former President Barack Obama, who was generally considered sympathetic to gun control, handgun sales rose 287%, while rifle and shotgun sales climbed 166%, according to the U.S. Fish and Wildlife Service.

"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 Quincy Krosby, chief market strategist at Prudential Financial. 

"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."

Gun stocks had been struggling since President Trump was elected. Investors had bet that the new administration would not push as hard for legislation to increase restrictions on 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.