Could the utilities sector be October's standout star?
Stocks have been feeling the heat in the month of October, with only a few sectors being the exception. One of which is the utilities sector, leading in monthly gains while lagging the farthest behind year-to-date. Yahoo Finance’s Jared Blikre deep dives into the resurgence and what investors are leaning towards.
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
Video Transcript
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BRAD SMITH: From a hot surge summer to a fall fumble, stocks have been feeling the pain so far this season. And October has been no different. But one sector in the S&P 500 has managed to eke out some gains this month. It's utilities, sexy. Joining us now to shine some little light on this and this bright spot, our very own Jared Blikre.
JARED BLIKRE: You know, it's not too often that utilities become interesting, but they are right now. That is that one lone green speck among the sea of red here, XLU. And let me just chart the year to date price action here basically from the upper left to the lower right.
Now, what was happening during this time, interest rates, yields were going higher. And for the most of this, XLU, it's an interest rate sensitive sector, competes with bonds in terms of yield for investors' money. We saw a lot of down pricing here.
But only within the last couple of weeks, utilities have really become the outperformers. And that's what we're seeing now. Utilities within the grand scheme of things on the year to date basis, guess what, they're still dead last. So it's only as of late that we've seen utilities, kind of, pick up the slack.
And if I'm looking at the top four sectors here besides utilities, XLP, that's consumer staples, that's defensive. XLV, that's health care, that's arguably defensive. And then XLK, that's arguably defensive too because that's dominated by a lot of the mega-cap names that have just been the reflexive go-to thinking back to Cathie Wood's cash stocks. I'm not supporting that mentality, but I think that's basically what was happening.
Now, here is the 10-year T note yield I mentioned. It's been on a tear going back six months from 3 and 1/2% to 5%. That is 150 basis points, a huge, huge step for the bond market there. Probably we've seen this happen before, not within the last four decades. And back then the price action was arguably a bit worse.
Now, I want to dive inside the utilities sector here and show you some of the constituents. And here we go. This is still a month-to-date basis.
Now, if I change this on a year to date, you can see the red. Again, most of the year, utilities have been under pressure because of the rise in yields. But now over the last five days, you can see what a difference that makes. So I think at this stage in the equity cycle where utilities were not loved before and now we're seeing this resurgence where market participants are a little bit more skittish and they're liking those defensive names like staples and health care as well. Guys.
SEANA SMITH: All right, Jared. Thanks so much for the latest on that. Utilities, you're making it interesting.
JARED BLIKRE: Oh, thank you.
SEANA SMITH: Like you said, it's, kind of, a tough job sometimes.
