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The Fed’s Cautious Projections Lift Utilities Stocks and ETFs

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XLU gains 2.2%

Last week was crucial for utilities stocks, as the Federal Reserve Open Market Committee met to chart the path of monetary policy. The utility sector has been one of the key gainers on the Fed’s loose monetary policy over the last few years. The Fed’s cautious stance on economic projections provided a breather to the utility sector, lifting the Utilities Select Sector SPDR (XLU) up 2.2%. During the same period, the broad-based SPDR S&P 500 ETF Trust (SPY) gained 2.2%. SPY is a key ETF tracking the S&P 500 benchmark index. The iShares Core S&P 500 ETF (IVV) also tracks the S&P 500.

All 41 utilities stocks in our basket gained during the week.

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NRG Energy rebounds

After hitting a 52-week low the previous week, NRG Energy (NRG) rebounded with an 8.4% gain. NRG Energy is a highly leveraged player in the sector with over $20 billion in debt. Over half of this debt was added in 2013 and 2014, when interest rates were low. The stock has shown high volatility, as speculations about the timing of a rate hike are making the rounds in the market. High leverage makes NRG Energy highly vulnerable to a rate hike.

Other notable gainers

PPL Corporation (PPL) gained 8.1% to end the week at $34.36 with a market capitalization of $22.9 billion.

AES (AES) gained 7.7% to end the week at $12.84, with market capitalization of $9 billion.

Covanta Holdings (CVA) gained 7.6% to end the week at $22.83, with a $3 billion market capitalization.

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