August was a down month for utilities and other essential services companies—likewise the broad stock market. That continues a trend beginning in late April, when fears first stirred of an end to Federal Reserve easing.
Since then, the Fed has not changed policy. But the markets have acted as though much higher interest rates are a done deal. The yield on the benchmark 10-year Treasury Note yield has nearly doubled. And expectations are we’ll see it at 4 to 5 percent, as the precursor to a dramatic, across the board rise in rates.
Utility stocks have paid a greater price than most stocks, due to their reputation as being bond substitutes. The Dow Jones Utility Average is down more than 10 percent from its highs. And more than a few investors are throwing in the towel on the sector entirely, ignoring strong recent earnings and dividend growth.
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