Nov. 12, 2014, 6:57 PM
- Utility stocks tumbled today amid Pres. Obama's plan with China to curb greenhouse gas emissions, and will renew a push by environmental activists to deny government approval of pipeline projects such as Keystone XL (NYSE:TRP) and Alberta Clipper (NYSE:ENB) that would carry Canadian oil sands crude to U.S. refineries.
- “Achieving these goals will almost certainly require changes to the implementation of the EPA power plant regulations,” Council on Foreign Relations analyst Michael Levi says, referring to draft rules issued by the EPA in June that already have sparked pushback.
- Congressional Republicans, soon to have a majority in the Senate in addition to the House, promise to do everything possible to stop Obama’s emissions targets for power plants; the administration believes GOP gains mean Obama will not get legislative help in achieving his goals but that Republicans are unlikely to be able to stop executive orders and environmental regulations.
- ETFs: XLU, IDU, VPU, UPW, RYU, FUTY, FXU, SDP
Nov. 12, 2014, 2:14 PM
- Utility stocks, among the year’s top performing sectors in the market, are sharply lower today - a bad sign, says Weeden & Co. head researcher Michael Purves, who believes now is the time to reduce or hedge utility holdings such as the Utilities Select Sector SPDR Fund (XLU -1.9%).
- Ultra-low bond yields have made utility stock payouts look good by comparison., but valuations have been moving up; Purves says the rally has put XLU’s P/E ratio for the next 12 months at 17.4x, near a 10-year high.
- Investors ought to “start to take profits, given the run was getting long in the teeth,” Purves writes.
- The top 10 XLU holdings are all lower today: DUK -2.5%, NEE -1.7%, D -1.9%, SO -1.4%, EXC -2.8%, AEP -2%, SRE -1.7%, PPL -1.8%, PCG -1%, PEG -2.8%.
- Other ETFs: IDU, VPU, UPW, RYU, FUTY, FXU, PUI, SDP
Oct. 3, 2014, 4:18 PM
Sep. 24, 2014, 10:11 AM
Sep. 18, 2014, 12:53 PM
- Banks, insurers, brokerages and anything else starved for yield continue to gain following yesterday's FOMC news. Among the gainers are Bank of America (BAC +1.9%) - which breaks above $17 for the first time since April - Citigroup (C +2.7%), Wells Fargo (WFC +1.1%), PNC (PNC +1.1%), Fifth Third (FITB +1.7%), SunTrust (STI +1.2%), Schwab (SCHW +2.3%), Prudential (PRU +2.5%), and Lincoln National (LNC +2.4%).
- The XLF +1.2%, KBE +1.5%, and KRE +2%.
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, RYF, KRS, FINZ
- Lit up bright red is the utility sector (XLU -1%), led by Southern Company (SO -1.1%), Dominion Resources (D -1.2%), Duke Energy (DUK -1.4%), and Pinnacle West (PNW -1.9%).
- Utility ETFs: XLU, IDU, VPU, UPW, RYU, FUTY, PUI, FXU, SDP, PSCU
Aug. 9, 2014, 8:25 AM
- Investors who had flocked to utility stocks now may be wondering what went wrong, after the sector was the S&P's worst performer in July.
- Fears of rising interest rates have recently sent dividend-paying stocks and high-yield junk bonds tumbling; utility stocks also have been hurt by the power sector's growing exposure to volatile natural gas prices, which have dropped ~19% since mid-June.
- Some analysts think dividend growth among utilities could slow or even stop, with power demand falling and utilities being forced to spend record amounts on replacing and upgrading aging plants and meeting stricter emission standards; Exelon (NYSE:EXC) and FirstEnergy (NYSE:FE) are big utilities that have cut dividends this year.
- Utilities that auction the power they generate - and are most exposed to moves in gas prices - have fallen the most; NRG and EXC have lost 20% and 13%, respectively, since the end of June.
- Regulated utilities such as Southern Co. (NYSE:SO) and Duke Energy (NYSE:DUK), whose rate changes are more closely controlled, haven't been hit as hard.
- ETFs: XLU, IDU, VPU, NLR, JXI, NUCL, UPW, RYU, DBU, IPU, FUTY, FXU, SDP, UTLT
Jul. 29, 2014, 12:20 PM
- Americans are plugging in more gadgets than ever, and the U.S. unemployment rate has been improving, but these trends have provided little help for the country's electric utilities.
- U.S. electricity sales look anemic for the seventh year in a row, prompting some executives to abandon their century-old assumption that electricity use tracks overall economic conditions, according to a WSJ analysis.
- The diverging trends could pose a problem for utility companies, which often need to expand sales volume yearly just to maintain their expensive equipment.
- The U.S. Energy Information Administration says it no longer foresees any sustained period in which electricity sales will keep pace with economic growth.
- ETFs: XLU, IDU, VPU, UPW, RYU, FUTY, FXU, SDP
Jul. 11, 2014, 11:10 AM
- Morningstar’s Robert Goldsborough thinks utilities are unlikely repeat their mid-2013 swoon, asserting that investors now are pricing in 4% U.S. Treasury yields, which would suggest no substantial downward moves in utilities if rates hit that level; utilitiy companies also could continue their recent outperformance if Treasury rates stabilized close to 3%.
- On the other hand, Brendan Conway of Barron's sees this as reason for caution in the long run; if the climate of falling rates since 2000 is one of the drivers of utilities’ tremendous decade-plus performance, then the end of that climate would seem to bode ill for ETFs such as VPU and XLU.
- Also: IDU, UPW, FUTY, RYU, PUI, FXU, SDP, PSCU
Jul. 8, 2014, 12:26 PM
- Leading this week's decline are a lot of the same names which led March's "momo" selloff, among them the biotechs (XBI -4.5%) and social media (SOCL -4.4%). Also familiar, small caps (IWM -1.5%) are off more than the other major indexes.
- Doing their jobs are the low volatility ETFs like SPLV (SPLV) and USMV (USMV -0.2%), as well as defensive sectors like the utilities (XLU +0.6%).
- Raymond James' typically bullish Jeffrey Saut is out with a note calling for the first decent pullback of the year - a 10-12% decline - to commence later this month or early August, and he suggests investors begin raising cash.
- Biotech ETFs: XBI, BBH, FBT, PBE
- Low-vol ETFs: SPLV, LGLV, CFA, CFO
- Utility ETFs: XLU, IDU, VPU, UPW, FUTY, RYU, FXU, PUI, SDP, PSCU
Jun. 24, 2014, 3:32 PM
Jun. 23, 2014, 11:35 AM
- The U.S. Supreme Court places some limits on the EPA program to deal with power plant and factory emissions of gases blamed for global warming, trimming the scope of the agency's permitting effort while still allowing some emissions regulations at larger facilities such as power plants.
- The Court says the EPA lacks authority in some cases to force companies to evaluate ways to reduce carbon dioxide emissions, but the decision does not affect EPA proposals for first-time national standards for new and existing power plants, and it preserves the EPA's authority over facilities that already emit pollutants the agency regulates other than greenhouse gases.
- Justice Scalia, writing for the court, says the ruling will allow the EPA to regulate 83% of all greenhouse gases emitted from plants nationwide vs. the 86% the agency had sought.
- ETFs: UNG, XLE, XLU, DGAZ, UGAZ, ERX, KOL, IDU, VDE, OIH, BOIL, GAZ, ERY, VPU, FCG, DIG, GASL, DUG, KOLD, IYE, UNL, GASX, NAGS, PXJ, FENY, RYE, UPW, RYU, FUTY, FXN, DCNG, FXU, DDG, SDP
Jun. 18, 2014, 6:41 PM
- Investors plowed $1.2B into U.S. utilities sector ETFs during the past five days, signaling skepticism that an economic recovery is strong enough to eventually lift interest rates.
- Military conquests in Iraq by Islamic insurgents over the past week probably fueled the trend, and the Fed said today that interest rates will stay low for a considerable period even amid economic growth after it stops buying back bonds; utility stocks responded, with the S&P 500 Utilities Index jumping 2.2% in its biggest one-day gain since last September.
- The FXG and FXU ETFs enjoyed record cash inflows June 16, according to data compiled by Bloomberg; State Street’s Utilities Select Sector SPDR (XLU) was the best-performing sector ETF in the past week, attracting $468M.
- ETFs: IDU, VPU, UPW, RYU, FUTY, PUI, FXU, SDP
Jun. 3, 2014, 7:02 PM
- Pres. Obama’s plan to cut power plants’ carbon dioxide emissions places a widely differing burden on different states; EPA figures show targets for 2030 range from a 72% reduction in measured emissions rates to just 11%.
- As well as having the highest emissions rate goal, North Dakota is being asked to make the smallest cut from 2012 levels (11%); Washington state has the lowest goal and is being asked to make the steepest reduction (72%).
- Though Washington's governor supports the climate plan, heavy polluters, such as Louisiana and Texas, promise to fight the rules; the top U.S. emitter of greenhouse gases, Texas must cut ~100M metric tons of carbon dioxide from its annual emissions, more than the next three states combined.
- The EPA says it is trying to be flexible, but such an approach could leave it vulnerable to legal challenges.
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, IYE, GASX, PXJ, UPW, FENY, RYE, RYU, FUTY, FXN, FXU, DDG, SDP
Jun. 3, 2014, 12:45 PM
- EPA chief Gina McCarthy says she expects for significant changes in proposed state emission goals before a final rule is issued next year if the individual states show they can’t meet the targets.
- McCarthy says the agency made changes when developing its rules on mercury pollution in 2012 after utilities complained, and says she "wouldn’t be surprised if we made significant” revisions to the carbon proposal.
- McCarthy notes "confusion" around the targeted 30% emission cuts, saying it’s not a goal of the plan but an estimate of what the EPA thinks can be achieved.
- Coal names are broadly lower: WLT -4.4%, ACI -3.7%, ANR -2%, ARLP -1.9%, CNX -1.3%, CLD -0.3%, BTU -0.2%.
- Big utilities are mostly higher: EXC +1.6%, AEP +1%, NRG +0.7%, D +0.5%, XEL +0.4%, SO +0.3%, PEG +0.2%, NEE +0.1%, DUK -0.2%
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, IYE, GASX, PXJ, RYE, FENY, UPW, RYU, FUTY, FXN, FXU, DDG, SDP
Jun. 2, 2014, 7:27 PM
- Representatives of the coal and utility industries criticized proposed new U.S. emissions rules for power plants, but WSJ reports that some were relieved the outcome wasn't worse.
- The industries had been hoping the EPA would apply emission reduction standards from a baseline of 2005, and they feared the EPA draft would use a more recent, and thus tougher-to-meet baseline, but the Obama administration decided on 2005 after all.
- Coal-fired power plants won't have much difficulty meeting the EPA's mandate for a 30% reduction in carbon emissions by 2030, an industry lobbyist says, since carbon emissions from coal plants have dropped 14% since 2005 (also).
- However, coal companies and electric plants remain concerned about an earlier deadline to reduce emissions 25% by 2020; other big consumers of power, such as steel mills, say they too could have a tough time with the new rules.
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, SLX, IYE, GASX, PXJ, FENY, RYE, UPW, FUTY, RYU, FXN, FXU, DDG, SDP
Jun. 2, 2014, 3:31 PM
- Walter Energy (WLT -6.3%) shares aren't helped by the coal producer's statement that new EPA proposals aimed at controlling carbon emissions from U.S. power plants should have no material impact on the company; in fact, WLT is down more than peers: CNX +1.1%, BTU +0.1%, CLD -0.3%, ACI -2.8%, ANR -4.6%.
- Long-term losers also will include electric companies that burn lots of coal - such as American Electric Power (AEP +0.1%), Duke Energy (DUK -0.3%), Southern Co. (SO -0.3%) and NRG Energy (NRG -0.1%) - but stiff regulations have been expected for some time.
- Likely winners include companies that pump natural gas and those that use it as their primary fuel, such as Calpine (CPN +0.3%), and companies that operate nuclear plants that generate little carbon but have been expensive to run, such as Exelon (EXC -1%), hope that their aging plants will become more competitive.
- A reduction in coal-fired capacity would increase utilities' demand for natural gas by 3B-10B cf/day from 22B cf/day now, potential benefiting major natural gas producers like Chesapeake Energy (CHK +2.1%), Cabot Oil & Gas (COG -0.8%) and Range Resources (RRC -0.6%).
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, GASL, DUG, IYE, GASX, PXJ, FENY, RYE, UPW, FUTY, RYU, FXN, FXU, DDG, SDP
The iShares Dow Jones U.S. Utilities Sector Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of U.S. utilities stocks, as represented by the Dow Jones U.S. Utilities Index.
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