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Feeling Left Out? Why Utilities Haven't Joined the Market Rally

In Barron's Trader column this weekend, I warned that utilities could be in for a bumpy ride. That wasn't meant to be a next day prediction, but the Utilities Select Sector SPDR ETF (XLU) is sinking today, even as the market rallies. And the reason for the short-term moves in each might be for the same reason: Tax reform.

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Here's what I wrote about utilities over the weekend:

So if the S&P 500 is really rallying because of the imminent passage of tax reform, then it makes sense for utilities to lag. But it's not the only reason utilities are feeling some pain today. Scana (SCG) has dropped 3.7% to $42.79 at 12:30 p.m. today on reports that evidence emerged that it didn't reveal material information about a nuclear project. And that's on top of the possibility of rising bond yields in 2018.

In a note released last Friday, Credit Suisse analyst Michael Weinstein and team recommended buying utilities with increasing cash flow:

Companies that stand to benefit include NextEra Energy (NEE), Dominion Energy (D) and Exelon (EXC).

A lot of good it's doing them: Shares of NextEra Energy have fallen 0.7% to $157.29, while Dominion Energy has dropped 1.8% to $83.42, Exelon is off 0.3% at $40.60, and Scana has tumbled 3.8% to $42.75. The Utilities Select Sector SPDR ETF has 0.9% to $54.55.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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