NEW YORK, Dec. 27, 2025, 1:42 p.m. ET — MARKET CLOSED
Utilities stocks are heading into the final stretch of 2025 with a familiar “defensive” reputation—plus a newer, more complex growth narrative tied to AI-era electricity demand. With U.S. exchanges closed for the weekend, investors are digesting Friday’s quiet, post-Christmas session and a short list of fresh headlines that nevertheless matter for regulated utilities: winter-storm risk in the Northeast, rising scrutiny of power bills amid data-center expansion, and renewed legal and policy uncertainty around offshore wind.
The backdrop is a market that’s still near all-time highs but showing year-end thinness. U.S. stocks finished Friday only slightly lower in light volume, and the 10-year Treasury yield hovered around 4.13%—a level that continues to matter for rate-sensitive utilities valuations and dividend comparisons. [1]
Utilities sector snapshot: what investors are looking at heading into Monday
The Utilities Select Sector SPDR Fund (XLU)—a widely watched utilities ETF proxy—last traded around $42.78, essentially unchanged versus the prior close, while the Vanguard Utilities ETF (VPU) hovered near $185.51.
Among bellwether utility names, recent pricing reflected the same “holiday tape” feel: NextEra Energy (NEE) near $80.41, Duke Energy (DUK) near $117.18, Southern Company (SO) near $87.17, and Dominion Energy (D) near $59.20.
While the sector often trades like a bond substitute, utilities can still swing sharply around three recurring catalysts:
- Interest rates and Fed expectations (because utilities’ dividends compete with bond yields and utilities finance large capex programs).
- Weather and reliability events (because outages can drive near-term costs and long-term regulatory scrutiny).
- Load-growth headlines (because AI and electrification are reshaping demand forecasts, capex plans, and, increasingly, valuations).
Over the past 24–48 hours, all three themes have appeared in some form.
What moved utilities in the last 24–48 hours
1) Winter-storm risk hit sentiment into the weekend
A Dow Jones utilities roundup published Friday evening noted that utility stocks were among the day’s notable laggards as Northeast states braced for a winter storm, with bond yields slightly lower and markets leaning toward a January “hold” scenario for the Fed. [2]
The storm itself has been disruptive across the region. Reuters reported that winter storm warnings and hazardous conditions triggered widespread flight cancellations and delays, with New York and New Jersey declaring states of emergency as conditions worsened around major airports. [3]
For utilities investors, the near-term market question is less about a single storm’s headline and more about the second-order effects:
- restoration and overtime costs,
- the timing and recovery of storm-related expenses through rates,
- and the political sensitivity of reliability and affordability in high-bill regions.
State regulators and public-utility commissions also amplified storm-preparedness messaging in recent hours, underscoring how quickly reliability concerns can become a public-policy issue. [4]
2) Power bills and data centers returned to the spotlight
A WBUR/NPR “Here & Now” segment published Friday highlighted that power-hungry data centers are “partly to blame” for rising electricity prices, while also noting that stronger demand can boost utility-sector profitability. The segment featured host Indira Lakshmanan speaking with journalist Nick Bowlin. [5]
That tension—higher demand as a profit tailwind, but also a ratepayer and political flashpoint—has become a defining theme for utilities entering 2026. The market increasingly rewards utilities that can attract large-load customers (think data centers, industrial reshoring, electrification) and persuade regulators and communities that the buildout won’t disproportionately raise residential bills.
3) Offshore wind uncertainty escalated with new legal action
One of the most consequential utilities-related headlines late Friday into Saturday involved Dominion Energy and offshore wind.
Dominion released a statement on Dec. 22 responding to a federal action suspending work on its Coastal Virginia Offshore Wind project. In that statement, Dominion argued the project is essential to grid reliability and growing energy needs, emphasizing that Virginia “needs every electron” as electricity demand rises. [6]
On Friday night, The Verge reported that Dominion filed suit challenging the federal stop-work action and framed the dispute in the context of surging power demand tied to AI and data centers. The Verge also cited comments from former Navy commander and national security expert Kirk Lippold, who questioned what had changed to justify stopping offshore wind programs. [7]
The lawsuit follows a broader policy fight around offshore wind. Earlier this week, Reuters reported the U.S. government paused leases for five offshore wind projects, citing radar and national security concerns, affecting projects tied to multiple developers and utilities along the East Coast. [8]
For utilities stocks, offshore wind headlines are not just “green energy news.” They can affect:
- multiyear capital plans,
- regulatory relationships and cost-recovery assumptions,
- and investor confidence in the stability of project timelines—especially where large assets are already under construction.
4) Grid constraints and “behind-the-meter” power solutions are becoming a market storyline
A separate, fast-moving theme: the grid is struggling to connect new large-load demand quickly.
A Financial Times report published Saturday described data-center developers turning to on-site power solutions—including aeroderivative turbines (adapted from jet engines) and diesel generators—because grid connection delays can stretch for years in some markets. [9]
For regulated utilities, this is a double-edged narrative:
- It underscores how strong demand is.
- But it also highlights the bottlenecks (interconnection queues, transmission buildouts, equipment lead times) that can slow rate-base growth or push customers toward alternatives.
The macro setup: why interest rates still matter for utilities stocks
Friday’s session was quiet, but it reinforced a key point: rates are not out of the picture.
The Associated Press noted the 10-year Treasury yield edged down to around 4.13% as stocks finished slightly lower. [10]
Low volatility is also shaping risk appetite. Cboe listed the VIX “fear gauge” around 13.60 as of Dec. 26. [11]
Utilities investors watch this combination closely:
- When volatility is low and risk-on sectors lead, utilities can lag.
- When yields fall or volatility rises, utilities often regain relative appeal—especially for income-focused portfolios.
Still, the 2025–2026 utilities story is no longer only about “defense.” Structural demand growth is pushing many investors to view utilities as both income and infrastructure growth—a reframing that can support higher valuations, but also raises execution and regulatory stakes.
Forecasts and analysis: the 2026 setup for utilities stocks
A demand surge that’s bigger than most plans assumed
Deloitte’s 2026 power-and-utilities outlook argues U.S. electricity demand began accelerating in 2025 and that peak demand could rise meaningfully over the next decade, with data-center demand becoming a dominant driver. Deloitte also highlights the scale of grid constraints, including the large volume of generation stuck in interconnection queues. [12]
Reuters has also reported that the U.S. Energy Information Administration expects power use to reach record highs in 2025 and 2026—supporting the broader “higher load growth” thesis that’s changing how investors model utility earnings and capex. [13]
Capex, rate base, and the “growth-plus-dividend” thesis
State Street Investment Management (SSGA) has framed U.S. utilities as entering a new growth cycle driven by AI and electrification. In its analysis, SSGA points to large planned spending on grid upgrades and discusses how rate expectations and yields can influence utilities’ appeal. The note is authored by Saketh Reddy, CFA, and Dane Smith. [14]
Charles Schwab, in a separate analysis, has emphasized how the AI-linked rally in parts of the sector complicates the classic “defensive dividend” playbook, noting that as prices rise, yields can compress—and that utilities’ yields have at times been less compelling relative to Treasuries and CDs. [15]
Deal activity and an “all-of-the-above” power buildout
M&A and asset deals are another pillar of the utilities narrative, particularly as the sector tries to secure dispatchable generation, transmission, and reliability assets.
PwC’s US Deals 2026 outlook for power and utilities describes a surge in deal value and notes that transactions are increasingly shaped by infrastructure demand and data-center-driven load growth. PwC quotes Kenyon Willhoit, a Deals Principal in Power and Utilities, saying: “Policy shifts, the need for an ‘all of the above’ energy strategy and forecasts for surging demand are driving transactions focused on securing reliable generation and strengthening market position.” [16]
Reuters has also reported that Big Tech is leaning into an “all of the above” strategy to secure power for AI, citing S&P Global projections for data-center power supply growth—another signal that utilities and their generation partners will remain central to the AI infrastructure buildout. [17]
Market context: thin liquidity and the “Santa Claus rally” effect
Holiday trading conditions matter for interpreting short-term utilities moves. Reuters described Friday’s session as light-volume and short on catalysts. Carson Group chief market strategist Ryan Detrick told Reuters the market was “catching our breath” after a strong run and pointed to the “Santa Claus rally” period as a seasonal window investors watch for year-end upside bias. [18]
For utilities, thin markets can exaggerate day-to-day sector rotation—especially when headlines (storms, policy, rates) arrive during low-liquidity periods.
If the market is closed: what utilities investors should know before the next session
With U.S. stocks closed this weekend, here are the practical items utilities investors are likely to focus on before Monday’s open (Dec. 29):
- Rates first: the 10-year yield remains the key cross-asset signal.
Friday’s 10-year yield near 4.13% keeps utilities in a “tug of war” zone—high enough to compete with dividend yields, but not so high that it necessarily breaks the capex-and-growth narrative. [19] - Storm headlines can drive short-term relative performance.
Watch outage/restoration updates and any regulatory commentary, especially in the Northeast after storm-related disruptions. [20] - Policy and litigation risk is a real, tradable factor—especially for offshore wind exposure.
Dominion’s legal push and broader offshore wind lease uncertainty could remain in focus, particularly if more filings, court scheduling, or federal statements emerge. [21] - Expect a quiet earnings calendar, making macro and headlines more influential.
Kiplinger’s calendar for the week of Dec. 29 through Jan. 2 notes no significant quarterly earnings reports scheduled, a setup that can magnify the impact of rates, weather, and policy headlines. [22] - Know the holiday-week market schedule.
Investopedia reports stocks trade a full day on New Year’s Eve (Dec. 31) while bond trading ends early at 2 p.m., and markets are closed on Jan. 1 for New Year’s Day. [23]
That matters for utilities because the sector is sensitive to both equity liquidity and bond-market signals.
Bottom line: utilities are defensive—until they aren’t
Utilities stocks are ending 2025 in a rare position: traditionally defensive and yield-oriented, but increasingly viewed as part of the AI and electrification investment cycle. The last 24–48 hours delivered a concentrated reminder of the sector’s new reality—storm resilience, affordability politics, grid constraints, and policy uncertainty can all hit at once, even when the broader tape is sleepy.
As trading resumes, utilities investors will likely keep one eye on rates and the other on reliability and regulatory headlines—because in today’s market, the utility sector is no longer just a shelter. It’s also a wager on how fast the grid can grow up to meet the next wave of demand.
References
1. apnews.com, 2. www.marketscreener.com, 3. www.reuters.com, 4. www.puc.pa.gov, 5. www.wbur.org, 6. news.dominionenergy.com, 7. www.theverge.com, 8. www.reuters.com, 9. www.ft.com, 10. apnews.com, 11. www.cboe.com, 12. www.deloitte.com, 13. www.reuters.com, 14. www.ssga.com, 15. www.schwab.com, 16. www.pwc.com, 17. www.reuters.com, 18. www.reuters.com, 19. apnews.com, 20. www.reuters.com, 21. www.theverge.com, 22. www.kiplinger.com, 23. www.investopedia.com
