HomeMarket NewsOversold Utilities See Modest Rally as Bond Yields Rise Again

Oversold Utilities See Modest Rally as Bond Yields Rise Again

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Utility company stocks, represented by NYSEARCA:XLU, staged a modest rally in Tuesday’s trading session. This bounce back comes after the sector experienced significant losses in the previous session due to continued sell-offs in U.S. Treasurys, leading to a rise in bond yields.

Despite the yield on the 10-year Treasury note exceeding 4.8% for the first time since August 2007, bargain hunters saw an opportunity to buy stocks in the oversold utility sector. While bond yields on the two-year and 30-year notes also rose, utilities managed to regain some ground.

Some of the biggest losers from Monday’s sell-off, including NiSource (NYSE:NI), made a comeback, with a notable jump of 3.3% – the largest percentage gain since November. Other utilities showing signs of recovery include (FE) with a 3.1% increase, (CMS) with a 2.5% increase, (CNP) with a 2.3% increase, (SO) with a 2.1% increase, (AEE) with a 2% increase, (DTE) with a 1.9% increase, (ED) with a 1.9% increase, (PPL) with a 1.9% increase, (EVRG) with a 1.8% increase, and (SRE) with a 1.6% increase.

However, not all utilities were able to bounce back. NextEra Energy (NYSE:NEE) saw a modest gain of 1.2% after a 9% plunge on Monday, while NextEra Energy Partners (NEP) continued to decline, finishing -6.4% after a steep 16.7% drop in the previous session.

Bespoke Investment highlighted the oversold condition of the utility sector, with the S&P’s utility sector closing 3.2 standard deviations below its 50-day moving average. This represents the most oversold reading for the sector since February 2021. Despite the 11% decline in the sector over the past five days, Bespoke notes that the difference is significantly smaller compared to a similar decline in June 2022 when the S&P 500 was down over 10%. Bespoke also points out that, after adjusting for the S&P 500’s performance, the utility sector is underperforming by the widest margin over a five-day period since October 2022.

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