Improvements on the trade front with China pulled the markets higher last week, with the S&P 500 rising ~1.2%. Defensive utilities looked a bit exhausted last week after a long rally. They fell 0.6% overall.
The S&P 500 saw the best quarter in the last several years and gained more than 13% in the first quarter of 2019. In comparison, the Utilities Select Sector SPDR ETF (XLU) rose 10% in the period.
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The ten-year Treasury yield closed at 2.44%, while the three-month Treasury yield closed at 2.40% last week. While the inverted yields seem to be overturned for now, broader market uncertainty could continue to bother investors.
Movers and shakers
Almost all the top utility stocks trended lower last week, with American Electric Power (AEP) among those that fell the most at 1.6%. NextEra Energy (NEE), the biggest utility by market cap, fell 0.3%, while Duke Energy (DUK) fell 0.8% during the week. Dominion Energy (D) stock rose 1.5%. The top-yielding utility stocks Southern Company (SO) and PPL Corporation (PPL) fell 0.4% and 1.4%, respectively, last week.
Safe-haven utilities have beaten investors’ expectations, but they could show signs of slowing in the short term. Over the past 12 months, utilities, including dividends, have returned 20%, while the broader markets have returned 10%. Safe-haven utilities’ relatively slow earnings growth and premium valuations could be an obstacle going forward.
According to Bloomberg, some of PG&E’s creditors, which include Elliott Management, Pacific Investment Management, and Davidson Kempner Capital Management, are proposing a $35 billion exit plan that would allow the utility to emerge from bankruptcy within a year. PG&E stock fell more than 8% last week.