UPDATE: U.S. Defense Budget To Grow By 4% In Fiscal 2010

By Christopher Hinton

NEW YORK (Dow Jones) -- U.S. Defense Secretary Robert Gates is expected Monday to present Congressional leaders with additional details to the Pentagon's $534 billion budget request for fiscal 2010, which is likely to include procurement cuts to some large weapon systems.

The request is a 4% climb from last year's budget, making it virtually flat after adjusting for inflation. Supplemental funding, which includes money for overseas fighting in Iraq and Afghanistan, was $130 billion, down from about $136 billion in 2009.

Defense spending has nearly doubled since the terrorist attacks on Sept. 11, 2001. In total, the total U.S. federal budget has grown nearly 90% since 2001 to President Barack Obama's 2010 request of $3.55 trillion.

Analysts have noted a large number of large procurement programs that could see the ax as the Pentagon rebalances, including the airborne laser, TSAT, the joint light tactical vehicle, future combat systems, the Zumwalt-class destroyer, and some missile-defense related programs.

"We expect the greatest impact to Boeing (BA) with the likelihood of material changes to airborne laser, future combat systems," and ground-based midcourse missile defense, said Bernstein Research analyst Douglas Harned, in a note to investors.

Also up for cutbacks are Lockheed Martins Corp.'s (LMT) F-22 Raptor jet fighter and aircraft carriers built by Northrop Grumman Corp. (NOC), though Congress is expected to fight such attempts with the argument the programs create jobs.

Indeed, Inside Defense reports Gates may actually request 67 more Raptors, extending the program by another three years and bringing the final fleet number to 250. Such a move could smooth the way for other budget cuts that Congressional members might otherwise object to.

Gates may also seek to cut the Navy's carrier groups to nine from 11, the newsletter said.

The latest budget request places more focus on increasing military personnel and benefits. Plans include growing the Army by 547,400 soldiers and the Marines by 202,000. .

Investors have been anticipating a reduction in Pentagon spending for large weapon systems sine last summer, with the Spade Defense Index (DXS) falling nearly 30% since September to 1382.47.