Here’s Why Power Utilities Dominated the Stock Market on Monday

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Stocks in China crashed, and U.S. equities capped the longest losing streak in more than six months.

But you wouldn’t tell that from looking at shares of the companies responsible for delivering electricity and gas across the U.S. on Monday. In fact, PG&E Corp., owner of California’s biggest utility, had its best performance since March, and the utilities industry led all sectors of the Standard & Poor’s 500 Index.

While the S&P 500 sank for a fifth straight day, utilities led by PG&E rose 1.3 percent, the biggest gain since July 16.

The S&P 500 Index fell. Utilities did just fine.
The S&P 500 Index fell. Utilities did just fine.

The reason’s twofold:

Utilities are defensive stocks, purchased when investors flee other markets. They’re largely immune from booms and busts, with steady income, investment-grade debt ratings and profit margins set by regulators. So global jitters make utilities attractive.

They also pay dependable dividends that are more appealing when interest rates fall, as they did Monday.

Yields on U.S. 10-year treasury notes fell for five straight days.
Yields on U.S. 10-year treasury notes fell for five straight days.

“Interest rates are down, which makes their dividends more attractive to investors,” said Kit Konolige, senior utility analyst for Bloomberg Intelligence. “And this is a day when the overall market isn’t feeling too good.”

Bucking the overall market trend today were gains by every member of the S&P 500 Utilities Index except Exelon Corp. Gainers included Edison International and Duke Energy Corp. Utilities were the only sector to show an increase.

How long can the utility rally last?

So long as the market’s scared and interest rates are down. “That’s all it is,” Konolige said.

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