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How Utility Stocks Are Placed for the Future

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Apr. 16 2019, Published 11:08 a.m. ET

Utility stocks seem tepid

Last week, utility stocks continued to underperform broader markets for the third consecutive week. The Utilities Select Sector SPDR ETF (XLU) rose 0.2%, while the S&P 500 rose 0.5% for the week ending April 12. Easing recession tensions and a positive start to the earnings season boosted investors’ sentiment last week. The benchmark ten-year Treasury yield trended higher and closed at 2.56% during the week. Utility stocks and Treasury yields generally trade opposite to each other.

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Leaders and laggards

NextEra Energy (NEE), the biggest utility stock by market cap, rose 0.4%, while regulated utility giant Southern Company (SO) rose 1.7% last week. Southern Company stock has risen in the last few months and almost 20% YTD. The potential of reduced risks for Southern Company’s Vogtle plant  after federal loan guarantees last month could have impacted the continued rally.

Last week, Duke Energy (DUK) announced its plan to build, own, and operate a 200-megawatt wind generation facility in Starr County, Texas. The project is expected to be completed by the end of 2019.

The top-rallied utility stock in 2019, AES (AES) fell 1.4%, while PPL (PPL) fell almost 1% last week. So far, AES has risen more than 25% in 2019. The company’s better earnings prospects in the last few months likely transformed investors’ sentiment.

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