Utility stocks sizzle as lackluster U.S. economic data sparks recession worry
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The utilities sector easily takes the top spot on Wednesday's S&P leaderboard, +2.4%, with the group's countercyclical nature attracting investor support as the market weighs weaker than expected services sector data suggesting the U.S. may be heading for a recession.
Also, the second estimate of March's S&P U.S. Purchasing Managers Index increased less than expected.
Strength in U.S. Treasuries is narrowing the gap between the 10-year yield at 3.29% and the 3.04% average dividend yield of the SPDR Utilities ETF (NYSEARCA:XLU), giving utility names a boost and lifting the sector to its best reading in two months.
Seven of the top 15 gainers on the S&P 500 are in the utilities sector: Evergy (EVRG) +4%, Xcel Energy (XEL) +3.9%, FirstEnergy (FE) +3.7%, WEC Energy (WEC) +3.7%, American Electric Power (AEP) +3.7%, Alliant Energy (LNT) +3.5%, NiSource (NI) +3.3%.
Among other sector names in rally mode: Atmos Energy (ATO) +3.2%, DTE Energy (DTE) +3.1%, Eversource Energy (ES) +2.9%, Ameren (AEE) +2.7%, Duke Energy (DUK) +2.7%, Exelon (EXC) +2.3%, Southern (SO) +2.3%.
Utility stocks have sold off since August, as rising interest rates have given investors alternatives for income, and many stocks in the sector are trading at double-digit discounts to historical valuations, Eric Landis writes in an analysis posted recently on Seeking Alpha.