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How Utility Stocks Fared in the Market Rout Last Week

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Oct. 15 2018, Published 1:36 p.m. ET

Utilities fared better

After a fairly positive start, utilities tumbled later last week and closed 1.3% lower. In comparison, the broader markets lost ~4% during the week. The sell-off last week pushed the S&P 500 to a three-month low after fresh trade war tensions weighed mainly on the technology and industrial sectors. The defensives such as utilities fared better as investors turned to safe-haven options, given their higher yields and stable price movements.

The benchmark Treasury yields cooled off a bit last week. The ten-year Treasury yields fell to 3.15% from 3.23% early last week, its seven-year high. Utility stocks and Treasury yields trade inversely.

So far this year, the Utilities Select Sector SPDR ETF (XLU), a representative of the S&P 500 utilities, has risen ~2%, while the broader markets have risen ~3%.

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Leaders and laggards

NextEra Energy (NEE), the largest utility by market capitalization, and Duke Energy (DUK), the second-largest, each fell 1.7% last week.

Hurricane Michael did significant damage in Virginia, North Carolina, and Georgia last week. Dominion Energy, Duke Energy, and Southern Company, which have a large presence in those states, are working to restore power in the affected areas. Southern Company (SO) was down marginally, and Dominion Energy (D) fell 0.7% last week.

FirstEnergy (FE) and the merchant power stock NRG Energy (NRG) each fell 2% last week. FirstEnergy stock has recently been on a solid uptrend. It hit a new 52-week high of $38.70 on October 10. So far this year, it has gained more than 20%, significantly outperforming the broader utilities.

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