Inside the Top XLU Utilities’ Recent Performances



Utilities underperformed broader markets

US utilities witnessed major weakness on the brink of the New Year. In 2017, the Utilities Select Sector SPDR ETF (XLU) gained only ~8%, while the SPDR S&P 500 (SPX-INDEX) (SPY) rose almost 20%.

Utilities largely followed broader markets until December 2017, but after that, they started losing steam on lower tax expectations. Unlike other sectors, tax cuts are expected to be relatively less beneficial for utilities. (You can read more about this in NEE, DUK, D, and SO: How Have the Top Utilities Fared This Year?)

XLU % change

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Leaders and laggards

Broader utilities closed the week with marginal weekly gains, after losing ~7% in December 2017. At the same time, broader equities closed flat last week.

Among the top utilities, renewables giant NextEra Energy (NEE) rose 1%, while Southern Company (SO) stock fell nearly 1%. Southern Company recently received an approval from Georgia Public Service Commission to continue Plant Vogtle—the utility’s half-constructed nuclear power plant, which is running several years behind schedule.

SCANA (SCG), one of the most volatile stocks among the S&P 500 utilities, gained 2% last week. South Carolina Electric & Gas, the principal subsidiary of SCANA, said last week that it had filed a formal request to the Nuclear Regulatory Commission to withdraw its license to operate its VC Summer nuclear power plant and give up its interest in the project to co-owner Santee Cooper for no consideration. (For more, read SCANA’s Nuclear Mess Continues to Push the Stock Down.)

Meanwhile, top merchant power player NRG Energy (NRG) stock rose more than 1% last week. NRG remained one of the top-rallied stocks in the S&P 500 in 2017, managing to gain more than 130% for the year.


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