What Drove US Utility Stocks Last Week
Utilities last week
While ten-year Treasury yields soared significantly, US utility stocks showed notable weakness last week. The Utilities Select Sector SPDR ETF (XLU) fell more than 1% against broader markets’ surge of 1%.
As Reuters reported, utility giants such as NextEra Energy (NEE) and Duke Energy (DUK), which prominently operate in Florida, restored power to almost half of Hurricane Irma–affected areas in the state.
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Ten-year Treasury yields rose from 2.04% to 2.20% last week, their biggest weekly jump in the last six months. Bond yields likely rose after better-than-expected inflation data for August came in last week, increasing the possibility of another rate hike this year.
Top gainers and losers
The largest utility by market capitalization, NextEra Energy (NEE), rose 1.2% for the week. It has rallied more than 26% so far this year—nearly double the gain of broader utilities. Notably, NextEra Energy forms 10% in XLU.
Southern Company (SO) stock attained a notable bull run after Wall Street analysts’ turned optimistic on the stock recently. We’ll look at analysts’ outlook on Southern Company later in this series.
Duke Energy (DUK), the second-largest utility by market capitalization, trended lower during the week. Duke Energy filed a request to the NCUC (North Carolina Utilities Commission) to cancel its Lee Nuclear project in South Carolina in August 2017. However, the company plans to keep the license to build a nuclear plant, and Duke Energy’s long-term plan still considers building a new nuclear power plant in South Carolina. Still, the possibility of constructing a new nuclear plant seems very small, considering the current grim situation for US nuclear generation and the wide expansion of cost-effective renewables.
The largest independent power producer, NRG Energy (NRG), was the biggest loser for the week. It fell more than 4%. Hybrid utility stocks Exelon Corporation (EXC) and FirstEnergy (FE) were down 1.5% and 1.8% during the week, respectively.