Stocks to Watch for the State of the Union

In Barack Obama's State of the Union speech on Tuesday evening, the President is expected to focus on the economy. The address will emphasize setting the table for economic growth while also closing budget deficits through tax increases and spending cuts. "The core emphasis that he has always placed in these big speeches remains the same, and it will remain the same -- the need to make the economy work for the middle class," White House Press Secretary Jay Carney said. The issue of government spending is of particular importance to both the electorate as well as investors. According to a

from last week, 73 percent of voters believe that spending cuts are more likely to help the economy versus 15 percent who think that more spending will help. Out of the 13 issues that were tested, the more voters said that they were "extremely" concerned about government spending than any other issue. Nevertheless, the Obama administration seems set on striking a balance between cuts and key investments in education and infrastructure. Although the President may touch on issues such as gun violence, climate change, and immigration policy, the major emphasis of Tuesday's speech will be on the economy and jobs. "You'll hear from the President a very clear call for the need to take action to help our economy grow and help it create jobs," said Carney. He added that Obama's focus would be on making the middle class more secure and helping those trying to make it into the middle class. "That is absolutely going to be his focus in the second term as it was in the first term," said Carney. Investors will need to weigh the balance that the President is trying to seek. On the one hand, budget deficits and huge government debt creates a headwind for the economy and is clearly an issue that concerns Wall Street. On the other, if tax hikes and austerity measures to address these fiscal issues are implemented too severely, however, it could send the economy into a state of shock in the near-term. In terms of specific sectors that could be effected by the State of the Union speech, the most likely candidates are gun manufacturers, defense contractors, and alternative energy companies. Obama is expected to pitch a gun control law that would reinstate the assault weapons ban, end the manufacture of over-sized ammo clips and institute a more thorough background check system for gun buyers. The gun control aspect of the speech will likely effect shares of Sturm, Ruger & Company

and Smith & Wesson

. Both of those stocks plunged on heavy volume late in Monday's trading session before recovering and have been volatile in the wake of the Newtown school shooting which catalyzed the gun debate. Over the last 3 months, RGR is up around 5 percent while SWHC has lost almost 15 percent. Year-to-date, RGR has climbed almost 18 percent and SWHC is up 8 percent. Defense contractors such as Lockheed Martin

and Northrop Grumman

could also be effected in the wake of the speech. The industry has underperformed in the wake of planned steep defense cuts which were part of the fiscal cliff bargain. Over the last 6 months, shares of LMT are down 4 percent and NOC has lost 3 percent compared to a gain of more than 8 percent for the S&P 500. Other companies such as Raytheon

and General Dynamics

have also underperformed during the same time period. The President may also touch on his plans for climate change and alternative energy in Tuesday's State of the Union speech. The solar sector was sharply higher during the trading session as traders looked to front-run Obama's speech. First Solar

was last trading up around 4 percent to $33.66 as that stock has been the subject of takeover rumors. Other large gainers included SunPower Corporation

, up 6 percent, Yingli Green Energy

, up 8 percent, LDK Solar

, up 15 percent, and Suntech Power

, up 8 percent.