With the steep fall on March 22, the S&P 500 lost more than 0.7% on a weekly basis, while utilities continued to gain. The Utilities Select Sector SPDR ETF (XLU) rose 0.5% for the week ending March 22. Renewed tensions in the US-China trade war and the slowing global economy caused the steepest fall in the broader markets since January. So far this year, the S&P 500 has risen ~12%, while utilities at large have risen more than 10%.
Treasury yields and utility stocks usually move opposite to each other. The ten-year Treasury yield trended sharply lower and closed at 2.44% last week—lower than the three-month Treasury yield. When the long-term debt yields less than the short-term debt, it’s called a “yield inversion,” which might point to a recession. Concerns about a recession could move investors to safe-haven investments like utilities.
Leader and laggards
Southern Company (SO) closed marginally up last week. Last week, US Secretary of Energy Rick Perry announced up to $3.7 billion in loan guarantees to continue constructing the Vogtle nuclear power plant. The plant is years behind the schedule. The cost has doubled the initial estimate.