The aerospace and defense sector declined significantly following reports that the Pentagon is drafting a budget of $1.1 trillion, a $400 billion reduction from the Trump administration's initial $1.5 trillion request. This potential decrease in government spending is creating investor concern about future contract volumes and overall revenue for the industry, leading to a broad sell-off in defense-related stocks. The negative budget outlook overshadowed positive single-stock news, such as strong earnings and a record backlog reported by General Dynamics.