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XLU: How US Utility Stocks Fared Last Week

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Dec. 4 2020, Updated 10:53 a.m. ET

Recovery continued

US utility stocks continued to recover last week after being weak for more than three months. The Utilities Select Sector SPDR ETF (XLU), which tracks the S&P 500 Utilities Index, rose almost 3%. Broader markets increased more than 2% last week.

US Treasury yields showed a notable downtrend last week mainly because investors turned to safe havens amid fears about the US-China trade war. The ten-year Treasury yield declined from 2.9% to 2.7% during the week. Utility stocks generally trade inversely to Treasury yields.

The utilities sector has been one of the weaker sections of the broader markets in the last few months. So far this year, broader utilities have corrected more than 4%, while broader markets fell more than 1%.

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Movers and shakers

NextEra Energy (NEE), a renewables titan, rose more than 2%. Regulated utility giants Duke Energy (DUK) and Southern Company (SO) soared 3% and 3.6%, respectively, last week.

Dominion Energy (D), the third-largest utility by market capitalization, continued to trade soft. On March 27, 2018, Dominion Energy announced a public offering of 20 million common shares in connection with forward sale agreements. Dominion stock trended lower in the last few trading sessions likely due to the discounted price on its stock offering.

On March 31, 2018, FirstEnergy (FE) announced that its competitive subsidiary FirstEnergy Solutions filed for bankruptcy. The utility has been in a transformation stage for the last few years. The expected separation of its competitive segment will likely stabilize FirstEnergy’s earnings in the long term. Exelon (EXC), the largest competitive utility stock, rose more than 3% last week.

PPL (PPL) rose more than 4% last week.

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