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As government bond yields have continued to move lower in recent weeks, the chase for yield has accelerated. One area in which this is notable is utilities stocks, as represented by the Utilities Select Sector SPDR ETF (NYSARCA:XLU). However, this part of the market is now looking increasingly overbought and ripe for a pause or mean-reversion move lower. With that in mind, let's take a look at how to play the XLU ETF today.Source: Shutterstock When it comes to utilities as a sector of stocks, I often hear people discuss how this is a defensive sector and one to "hide in" when the broader stock market is in trouble. While that can be true sometimes, I find this to be a dangerous generalization and oversimplification of the true dynamics behind what drives utilities stocks and bond prices for that matter.Case in point: Lately the broader stock market has gyrated and is now just about to break to fresh all-time highs again … yet bonds and utility stocks have also seen a persistent bid. In other words, much of the recent rally in utility stocks was arguably more a factor of yield-searching investors buying dividend-paying utilities than it was an ominous sign for a big stock market meltdown … at least so far.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 6 Stocks Ready to Bounce on a Trade Deal XLU ETF Charts Click to EnlargeLooking at the multi-year weekly chart we see that as a result of the year-to-date rally, the XLU ETF has once again reached the very upper end of its 10-year upward-sloping channel. The simple question to ask oneself here is whether it's worth fighting this chart, i.e., betting on a breakout higher. To me, the answer is clear.No.While I am not calling for a collapse of utilities stocks here, I do think upside in the near-term is capped and a sideways-to-lower move is ahead, when you consider it through the lens of healthy price consolidation. Click to EnlargeOn the daily chart, a couple of things stand out that also confirm the overbought readings of the above weekly chart:* The recent rally in the XLU ETF has thus far not been met with a new high in momentum. This is shown by the MACD momentum oscillator at the bottom of the chart, which printed a high in March but since then has not yet made a new high or matched the highs from March. If you consider investor psychology for a moment, this may mean that buyers are exhausted in the near term.* The price area around $61 has offered overhead resistance since early June and while this does not mean a marginal overshooting move to the upside can't take place, this area does coincide with the very upper-end of the aforementioned multi-year trading range on the weekly chart.Simply put, active investors and traders at this juncture and around the $61 area could look to sell or short the XLU ETF with a downside target at $58.50.Any fresh bullish reversal from here would be a stop loss signal. Options traders could look to buy an at-the-money put or put spread using September options.Get FREE ACCESS to Serge's renowned Stock Market Scanner with actionable trade ideas. Get it HERE. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Blue-Chip Stocks to Buy for a Noisy Market * 5 Strong Buy Biotech Stocks for the Second Half * 6 Stocks Ready to Bounce on a Trade Deal Compare Brokers The post Trade of the Day: Short the Utilities Select Sector SPDR ETF appeared first on InvestorPlace.
Shares of Pacific Gas and Electric Co. rose 1.6% in premarket trading Wednesday, after the bankrupt utility said it reached agreements to pay $1 billion to resolve claims related to the 2015, 2017 and 2018 wild fires. The claims are held by 18 local public entities, including cities, counties, districts and public agencies, hurt by the Butte Fire in 2015, the Northern California fires in 2017 and last year's Camp Fire. The payment of the claims is subject to confirmation by the bankruptcy court. "This is an important first step toward an orderly, fair and expeditious resolution of wildfire claims and a demonstration of our willingness to work collaboratively with stakeholders to achieve mutual acceptable resolutions," said PG&E Chief Executive Bill Johnson. The stock has lost 19.4% year to date through Tuesday, while the SPDR Utilities Select Sector ETF has gained 14.1% and the Dow Jones Industrial Average has advanced 13.5%.
The utilities sector continues to offer a premium dividend yield along with stable upward price movement. On average, utility stocks are currently yielding 3.2%, while broader markets offer a yield close to ~2%.
Utility stocks are still strong based on their simple moving average levels. Southern Company (SO) stock is trading in the "overbought" zone. The stock is trading at a large premium to its support levels.
ETFs tracking three of the S&P 500's 11 sectors are headed for record closes Friday, but before investors see that as a bullish sign they should note two are for sectors used as bond proxies and the other is a defensive sector. The SPDR Real Estate Select Sector ETF rose 0.4% toward a third-straight record close; the SPDR Utilities Select Sector ETF rallied 1.1%, to top the previous record reached on June 6; and the SPDR Consumer Staples Select Sector ETF edged up 0.2% toward a seventh-straight record. Many use the REIT and utilities ETFs as bond proxies given their relatively high yields, with the REIT ETF yielding 3.16% and the utilities ETF yielding 2.97%, versus the S&P 500's implied yield of 1.99%. The 10-year Treasury note has been rallying, and yields have been falling, as investors believe the Federal Reserve's next move on interest rates will be a cut amid concerns that the economy is a slowing. That concern is also helping the consumer staple sector, which is seen as defensive as it includes companies that sell products consumer need rather than want.
In the latest equity market rebound, safer sector-specific ETFs stood out, reflecting a shift in attitude as investors look for more defensive plays in a time of lingering uncertainties. For example, investors may be looking into sector-specific plays like the Utilities Select Sector SPDR (XLU) , Consumer Staples Select SPDR (NYSEArca: XLP) and Real Estate Select Sector SPDR Fund (XLRE) . The utilities, consumer staples and real estate sectors of the S& 500 have been outperforming the broader market, with at least 69% of companies in each of those groups trading above their 50-day moving average, the Wall Street Journal reports.
Investors can take a look at exchange traded fund flows to see how markets respond to the developing global trade war. “Participation through ETFs has trended higher in the last month, aligning with escalation ...
Utilities exchange traded funds (ETFs), such as the Utilities Select Sector SPDR (XLU) , usually sport above-average dividend yields and defensive traits that investors seek amid broader market turmoil. Investors who are looking for companies to invest in that carry minimal risk will often consider utility stocks. Utility companies typically comprise the most fundamental necessities, such as food, water and shelter, or are closely related to the energy required to refrigerate food, heat up water and light up a house.
Rate cut expectations have been inching higher. What does the bond market's message send to investors? asks income expert Bryan Perry, editor of Cash Machine.
As is the case with the other 11 months of the year, there are sector-level opportunities with exchange traded funds in June. Using the original nine sector SPDR ETFs (there are now 11) as the gauges, just two average positive returns in the month of June, according to CXO Advisory. In a month that historically rewards playing defensive, it's not surprising that the best-performing sector SPDR in June usually is the Utilities Select Sector SPDR (NYSE: XLU).
Investors who are looking for companies to invest in that carry minimal risk will often consider utility stocks. Utility companies typically comprise the most fundamental necessities, such as food, water and shelter, or are closely related to the energy required to refrigerate food, heat up water and light up a house. The utilities sector is one of this year’s best-performing groups, underscoring the notion that many investors will embrace utilities stocks and exchange traded funds during favorable interest rate environments.
The trade war between the United States and China is well into its second year. Since Jan. 22, 2018, American stocks have made two runs into all-time-high territory, but overall, they haven't made much progress. The Standard & Poor's 500-stock index is just 2% higher than when the trade conflict started.Now, uncertainty has returned, which means volatility has returned. So today, we'll look at some of the best exchange-traded funds (ETFs) to battle another round of trade jitters.On-again, off-again talks between the U.S. and China seemed headed toward a resolution for most of 2019 but hit a considerable wall in May. The U.S. accused China of walking back some of its agreements and raised tariffs on $200 billion in Chinese imports from 10% to 25%, prompting Beijing to retaliate with new and escalated tariffs of its own.Certain sectors have taken on hair-trigger demeanors. For instance, technology, which experts think could be heavily targeted in future rounds of tariffs, swings daily on the latest comings and goings out of Washington and Beijing. Semiconductor companies, many of which generate gobs of their sales from China, are among the most susceptible stocks.The best ETFs to buy if you want to beat back the trade war, then, avoid these sensitive industries and instead focus on businesses that should come out far less scathed than others. Here, we look at seven top funds from various corners of the market. SEE ALSO: The 19 Best ETFs for a Prosperous 2019
As many corners of the stock market fared well on the new of temporary exemption of the export blacklist against Huawei, a few sector ETFs hit new 52-week high in the recent trading session.
Utilities: Analyzing Movers and Shakers Last Week(Continued from Prior Part)Institutional ownership in XLUAccording to the recent 13F filings, Goldman Sachs was the largest institutional investor in the Utilities Select Sector SPDR ETF (XLU) as of
Utilities: Analyzing Movers and Shakers Last Week(Continued from Prior Part)Chart indicatorsCurrently, the Utilities Select Sector SPDR ETF (XLU) is trading at $58.8, which is more than 1% and 6% above its 50-day and 200-day moving average levels,
Investors awaiting progress in the U.S.-China trade talks as Bloomberg reports China will stop buying soybeans from the United States. Meanwhile, Morgan Stanley CEO James Gorman says market segment is "fragile." Yahoo Finance's Seana Smith and Wealth Consulting Group CEO Jimmy Lee discuss.
The Dow drops more than 200 points as investors run for cover over trade fears. With CNBC's Brian Sullivan and the Fast Money traders, Tim Seymour, Karen Finerman, Dan Nathan and Guy Adami.