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Defensive Utilities ETFs Take the Lead

This article was originally published on ETFTrends.com.

Utilities stocks and sector-related ETFs were among the better performers Friday as investors took a more optimistic view over the defensive sector in response to easing bankruptcy concerns from the recent California wildfires.

On Friday, the Utilities Select Sector SPDR (XLU) gained 1.3%, Vanguard Utilities ETF (VPU) rose 1.2%, Fidelity MSCI Utilities Index ETF (FUTY) added 1.3%, iShares U.S. Utilities ETF (IDU) increased 1.1% and Reaves Utilities ETF (UTES) was 0.9% higher. Meanwhile, the S&P 500 was down 0.1%.

“We’re tilted toward a negative near-term outcome and expect a slowdown,” Barry Bannister, head of institutional equity strategy at Stifel Nicolaus, told the Wall Street Journal, adding that they have increased exposure to sectors such as utilities, consumer staples and health care. “We expect the S&P 500 stay rangebound through the end of the year until proven otherwise.”

Further strengthening the utilities play on Friday, the sector rallied in response to a top California Official's statement that the bankruptcy of PG&E (PCG), the owner of Pacific Gas & Electric, over wildfire-related liabilities would not be good for California citizens.

In a call with Wall Street analysts, California Public Utilities Commission head Michael Picker said he could not imagine letting PG&E go bankrupt as it faces billions of dollars in potential liabilities, fueling hopes of that the state would step in to support the beleaguered utility company, CNBC reports.

“In general, we try to make sure that all utilities have the economic strength and wherewithal to procure the goods and services that Californians need,” Michael Picker, president of the California Public Utilities Commission, told the Wall Street Journal.

PCG shares surged 37.9% Friday after plunging 63% over the past week.

"Why is the CPUC stepping up now vs. mostly looking for legislative initiatives earlier? Given the reaction in the stock market, we think there was an appropriate level of urgency that something needed to be done," an analyst at Citi Research wrote in a note Friday. "We also think the CPUC is stepping up now because it is easier for them to come out quickly to support the utility vs. something from the political spectrum."

For more information on the utilities sector, visit our utilities category.