Gunmaker stocks spike as Obama readies changes

DALLAS

On Monday, Obama moved to expand background checks to cover more guns sold at guns shows, online and anywhere else. The actions are designed to help prevent guns from being obtained by criminals and by those who are mentally unstable, Obama said.

"When the government attempts to tighten gun regulation, near-term sales of firearms tend to go up," said Rommel Dionisio, an analyst at Wunderlich Securities Inc. who covers Smith & Wesson. "Consumers are fearful of a certain class of firearms being restricted or legislated against."

Demand for firearms climbed in December on speculation about further gun control following the November attacks in Paris and after two gunmen on Dec. 2 killed 14 people in San Bernardino, Calif. Background checks by the Federal Bureau of Investigation, the best indicator for gun sales, jumped about 40 percent in December from a year earlier, Dionisio said.

Smith & Wesson rose 5.9 percent to $23.28 at the close in New York Monday and Sturm Ruger gained 3 percent to $61.39. Both were the biggest one-day increase since Dec. 10. The Standard & Poor's 500 index dropped 1.5 percent Monday as stocks sank worldwide.

How long the gunmakers' sales surge will continue depends on Obama's actions, Dionisio said.