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S&P 500 Utilities: A Look at Last Week’s Leaders and Laggards

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Strong possibility of a rate hike

There was some weakness in broader markets throughout last week due to fears of a trade war. At the same time, the defensives (utilities) steadily rose and gained approximately 2% last week (the week ended on March 16, 2018). Utilities have been on the receiving end so far this year. The Fed’s aggressive stance about interest rate hikes has strongly weighed on them recently. According to the CME FedWatch tool, the probability of another quarter-point interest rate hike from the Fed this week has gone beyond 94%.

US utility stocks have corrected roughly 11% in the last three months since the last rate hike in December 2017. The Fed appears even more aggressive this year and sees room for more than three rate hikes in 2018.

XLU % change

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Gainers and losers

Renewables giant NextEra Energy (NEE) stock rose 4% last week. It hit a new 52-week high of $161.70 on March 16, 2018. NEE has rallied the most among utility giants.

Duke Energy (DUK) and Southern Company (SO) rose 2% and 1%, respectively, last week. Dominion Energy (D), the third largest utility by market capitalization, fell more than 3% last week. It has been on a notable downtrend since the announcement of its acquisition of SCANA (SCG). Read more on this in What’s Next for Dominion Energy Stock? UK-diversified PPL (PPL) stock recovered marginally and rose 2.1% last week. It’s currently trading close to its 52-week low of $27.12.

California utilities, mainly those exposed to the wildfire fiasco, showed some positive momentum last week. PG&E (PCG) rose more than 7%, while Edison International (EIX) soared almost 10% last week. Read How California Utilities Are Performing amid Mounting Challenges.

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