Utilities rose last week
Investors seemed cautious about utilities last week, given the increased possibility of another interest rate hike in the Fed’s upcoming meeting. US Treasury yields continued to trade strong last week, and the ten-year Treasury yield closed at 2.90%, close to its four-year high. The Utilities Select Sector SPDR ETF (XLU) rose 1% while broader markets soared almost 4% last week.
Utilities—considered as bond proxies—have already corrected more than 12% in the last three months since the last rate hike in December 2017. The Fed appears even more aggressive this year concerning rate normalization and sees room for more than three rate hikes in 2018. According to the CME Group’s FedWatch tool, there’s an 89% chance that the rates will rise at the upcoming meeting.
Gainers and losers
The largest utility by market capitalization, NextEra Energy (NEE) rose 1.3% last week. During the recent weakness among peers, the Florida-based utility stood strong. It has lost only 3% in the last three months. UBS raised NextEra Energy’s price target to $171 last week. We’ll discuss the top utilities’ price targets later in this series.
The North Carolina–based Duke Energy (DUK) stock rose 1% while leading regulated utility Southern Company (SO) lost 1% during the week. Duke Energy announced the closing of its common stock offering of 21.3 million shares on March 9, which should result in almost $1.58 billion of net proceeds before expenses.
PG&E Corporation (PCG) stock rose more than 3% while NRG Energy (NRG), one of the most volatile stocks from the S&P 500 Utilities, surged more than 6% last week. Competitive utilities Exelon (EXC) and FirstEnergy (FE) rose more than 1% during the week.