Some days, the stock market makes no sense to me whatsoever. Other days … I wonder whether it ever will.

On Tuesday, North Korea reminded us that the world is a dangerous place, as it launched an artillery barrage against its peaceful neighbor to the south. That stocks such as Posco (NYSE: PKX) and SK Telecom (NYSE: SKM) cratered was only natural -- investors feared that their base of operations might soon be overrun. Literally. But investors initially dropkicked other stocks as well, in a knee-jerk reaction to the news -- stocks such as Lockheed Martin (NYSE: LMT), Boeing (NYSE: BA), United Technologies (NYSE: UTX), and Textron (NYSE: TXT). Defense contractors one and all, these are just the kinds of companies you'd expect to benefit from heightened fears of international conflict.

True, after the initial selloff, these shares began bouncing back. And 24 hours later, the situation reversed itself entirely. Korea went quiet, and investors, interpreting no news as being good news, sent shares of Boeing and Lockheed, UTC and Textron soaring. Except there's just one thing: There was news Wednesday, and it wasn't of the good variety:


 

Wednesday's durable-goods report out of the Census Bureau wasn't the kind of stuff you'd ordinarily expect to spark a stock-market rally. New orders for home appliances, automobiles, aircraft, computers, and similar long-lived equipment declined by 3.3% in October. That's not good news for the likes of General Electric, General Motors (NYSE: GM), Boeing, and Dell. But would you care to guess what single element of the economy accounted for more than one-third of the drop?

Mr. Market's biggest loser(s)
That's right: defense. Orders for the fighter jets and combat helicopters manufactured by Boeing and Lockheed, UTC, and Textron declined by more than 25% in October, as compared with September. These companies' performance was to blame for 1.2 out of the 3.3 percentage points of last month's decline, yet all four companies saw their stocks soar -- in fact, all four enjoyed gains superior to the 1% gain for the S&P 500 as a whole.

I have to say, the stock-price movements don't make a lot of sense. Come to think of it, there didn't seem to be much sense in the rebounds at Dell and Cisco, either. According to the Census Bureau, two of the weakest industries after defense were computers (new orders down 7.7% sequentially) and communications equipment (down 12.3%).

It almost sets a Fool to doubting whether markets really are efficient.

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The Fool has written calls (bull call spread) on Cisco Systems, but Fool contributor Rich Smith owns no shares of any company named above. Rich is not a licensed economist, but he plays one on the Web. Check out his latest stock recommendations on Motley Fool CAPS

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