Stocks of other gun companies fell, and one sporting-goods chain said it would temporarily stop sales of military-style firearms. In Washington, some former opponents of gun control signalled that they may change their position, potentially giving stricter gun laws their best chance of passage in years.
The most notable rejection of the gun industry came when the private-equity firm Cerberus Capital Management announced it would sell the maker of the rifle used in the massacre, which it called a "watershed event."
The shooting "raised the national debate on gun control to an unprecedented level," Cerberus said in papers announcing the planned sale. "We are investors, not statesmen or policy makers."
Bushmaster, Remington and DPMS are among the brands made by Freedom Group Inc., the largest firearms maker in the U.S.
The Madison, N.C., company sold 1.1 million rifles and shotguns last year, along with 2 billion rounds of ammunition. Its products are sold to law enforcement and military customers, as well as retailers who serve hunters and gun enthusiasts.
Cerberus, a large private-equity firm best known for investing in Chrysler and other troubled corporations, appears to have been under pressure from two sources: investors and the threat of more gun control.
Officials at California's huge teacher pension fund said they were reviewing a $600 million investment in Cerberus in light of the Connecticut shooting.
Through its stake in Cerberus, the California State Teachers' Retirement System owns a 2.4 per cent stake in Freedom Group, according to the pension fund.
Fund spokesman Michael Sicilia confirmed the fund owns approximately $4 million in shares of Sturm Ruger & Co. and $1.7 million in shares of Smith and Wesson.
Freedom Group has lost money in four of the last five years, according to financial filings on its website. Revenue in 2011 was $775 million, down from $848.7 million in 2009. Slightly more than half of its 2011 revenue came from guns, much of the rest from ammunition.
Cerberus filed papers in 2009 to take Freedom Group public, but withdrew the bid in 2011 without saying why. A Cerberus spokesman declined to comment Tuesday beyond the company's statement.
The assault weapons ban that expired in 2004 restricted the sale of some types of guns like those made by Bushmaster. The adoption of a similar law "could have a material adverse effect on our business," Freedom Group noted in its announcement.
In 2010, Freedom Group said it would close its Bushmaster plant in Windham, Maine, and shift the work to a plant in Ilion, N.Y. At the time, New York Sen. Charles Schumer praised the move as a way to strengthen Remington's ability to compete for Defence Department gun contracts.
Firms like Cerberus are basically privately run pools of money that invest in companies on behalf of pension funds. On Tuesday, the fund attempted to distance itself from the national debate.
"It is not our role to take positions, or attempt to shape or influence the gun control policy debate," the firm said. "That is the job of our federal and state legislators."
Meanwhile, Dick's Sporting Goods Inc. suspended sales of all "modern sporting rifles," the industry term for military-style guns. The company also removed all guns from display at its store closest to Newtown.
Dick's has not promoted military-style guns as much as some other retailers. Its circular distributed in newspapers on Sunday had a full page of hunting rifles, but no military-style ones.
By contrast, St. Paul-based retailer Gander Mountain featured a Black Rain Ordnance Inc. PG9, a military-style semiautomatic rifle, for $2,000. Other military-style guns were featured throughout, including several from Bushmaster. Such advertisements are generally printed well in advance, and so would have been prepared before Friday's shooting.
A Gander Mountain spokesman declined to comment on whether it would change its gun lineup.
Wal-Mart Stores Inc., which sells Bushmaster rifles in some stores, said it would not change the guns it sells, although a Bushmaster rifle that it still sells stopped showing up on its website Tuesday.
All the talk about additional gun control appeared to be driving increased gun sales, though. The Colorado Bureau of Investigation said it received a record 4,154 requests for background checks on Saturday, the day after the shooting.
That was slightly more than on its normal biggest day, Black Friday.
Bob Irwin, CEO of The Gun Store in Las Vegas, said customer traffic has jumped since the school shooting, with many customers concerned that more gun laws will be enacted. He has not pulled any guns from the shelf.
"My belief is the individual nutcase did this," he said. "The company that manufactured the gun didn't. That seems silly to deprive my normal customers of product because somebody misused a product from the same company. I can't really get my head around that being the rational reaction."
He agreed that the Connecticut attack demanded some kind of action. He suggested adding more security officers at schools.
Shares in publicly-traded gun makers dropped for a third-straight day.
Shares of Sturm, Ruger & Co. dropped 7.7 per cent to close at $40.60. They're down almost 11 per cent since Thursday, the day before the shooting. Shares of Smith & Wesson Holding Corp. fell 10 per cent to $7.79 — down almost 15 per cent from their Thursday close.
Outdoor goods retailer Cabela's Inc. fell almost 6 per cent to close at $38.77.
Associated Press writers Michelle Chapman and Jonathan Fahey in New York, Sandy Shore in Denver, and Judy Lin in Sacramento, Calif. contributed to this report.