Shares of power producers fell as a retreat from the sector continued.
One longtime utilities analyst said the retreat was likely to continue as long as Treasury yields were on the rise. Utilities have a two-fold link to the Treasury market. For one thing, utility yields, and hence stock prices, tend to track Treasury yields. Secondly, the sector is heavily indebted.
"Fundamentally, [utilities earnings] were great...there weren't any significant misses or negative surprises, they're doing what they need to do, and the outlooks are better," said Alex Kania, a utilities analyst at U.S. Bancorp-BTIG.
At the same time, rising demand for electricity has caused power producers to increase infrastructure investment, making utilities even more vulnerable to rising rates, Kania said. "Think about construction in a capex-intensive environment right now. Even relative to history [utilities] are a lot more reliant on debt in aggregate," Kania said.
Write to Rob Curran at rob.curran@dowjones.com
