Utilities Lag Broader Market Advance
The Utilities Select Sector SPDR ETF (XLU) closed Friday's session with a modest 0.58% gain to $43.35, significantly trailing the S&P 500's 1.97% surge and the Dow Jones Industrial Average's 2.47% climb to 50,115.67. This performance gap highlights the sector's current sensitivity to interest rate expectations as investors position for upcoming economic releases.
Economic Calendar Takes Center Stage
Market attention now shifts to critical U.S. economic indicators scheduled for release next week. The January Employment Situation report arrives Wednesday, February 11, followed by the January Consumer Price Index data on Friday, February 13. These reports are expected to influence Treasury yields and reshape Federal Reserve policy expectations, with many analysts anticipating a potential rate cut around June.
Bond markets reflected this focus, with the two-year Treasury yield edging up 1.5 basis points to 3.498% on Friday while the 10-year yield held near 4.21%. "The market remains hyper-focused on labor data," noted Scott Pike, senior portfolio manager at Income Research + Management, suggesting the Fed's trajectory might only change with "a surprise in the nonfarm payrolls report."
Sector Performance and Earnings Spotlight
Individual utility stocks showed mixed results. AES Corporation advanced 2.95% to $16.05, while Duke Energy declined 1.26% to $121.86 ahead of its fourth-quarter 2025 earnings release scheduled for February 10. NextEra Energy posted a slight 0.29% gain, and Dominion Energy dipped 0.30%.
The sector faces a clear risk-reward dynamic: stronger-than-expected economic data could push Treasury yields higher, diminishing the relative appeal of utility dividends. Conversely, weak data might support rate-cut expectations but raise concerns about economic growth and electricity demand. Duke Energy's upcoming earnings call with CEO Harry Sideris and CFO Brian Savoy will provide crucial guidance for sector outlook.
As trading resumes Monday, utilities investors will monitor bond market movements closely, with Duke's earnings setting the tone ahead of pivotal jobs and inflation data that could determine the sector's near-term direction.