New York, Feb 1, 2026, 13:37 EST — The market has closed.
- The Utilities Select Sector SPDR Fund (XLU) closed Friday 0.18% lower at $43.25, while the Utilities Select Sector Index dropped 0.21%.
- Investors brace for a rate-focused week, weighing President Donald Trump’s choice for Fed chair alongside new U.S. jobs figures.
- A fresh North American reliability warning has refocused attention on grid investment and the costs tied to storms.
U.S. utility shares wrapped up January under pressure, with interest rates regaining influence ahead of Monday’s open. The Utilities Select Sector SPDR Fund (XLU) slipped 0.18% to close at $43.25 Friday. The Utilities Select Sector Index dropped 0.21%, though it still posted a 1.32% gain for the month. (S&P Global)
The immediate issue is whether rising bond yields continue to pressure “bond proxy” sectors like utilities, known for their dividends and stable cash flows when growth stocks falter. Citizens Wealth chief investment officer Michael Hans noted on Friday that “markets are calibrating to Trump’s pick of Kevin Warsh … and the outlook for monetary policy,” even as investors juggle concerns over inflation and the risk of a government shutdown in Washington. (Reuters)
Next week kicks off another round of macro tests, starting with U.S. labor data that could shift rate expectations in a flash. The January nonfarm payrolls report is forecasted to show 64,000 new jobs, according to a Reuters poll. Markets now expect the Fed to hold off on cutting rates until June, Reuters’ “Wall St Week Ahead” column noted. (Reuters)
Beyond interest rates, utilities investors are now focused on the grid’s condition. On Thursday, the North American Electric Reliability Corporation warned that the risk of U.S. power outages is increasing. Winter demand is climbing, and shifts in the supply mix are tightening reserve margins, which are expected to shrink across multiple regions later this decade. (Reuters)
The winter storm is still making headlines. According to a Reuters sustainability newsletter on Friday, the late-week storm claimed at least 38 lives across 14 states and cut power to over 296,000 homes and businesses. This serves as a stark reminder of how fast restoration expenses can soar. (Reuters)
Big utility stocks closed the week on a mixed note. NextEra Energy dipped 0.3% to $87.90. Duke Energy climbed 0.4% to $121.35, and Southern Co inched up 0.2% to $89.31.
Traders are eyeing a possible rotation back into defensives if the earnings-driven market remains unsettled. U.S. equity funds attracted $10.73 billion in the week ending Jan. 28, while sector-specific funds recorded their largest weekly inflow since at least 2022, according to LSEG Lipper data. (Reuters)
Utilities find themselves caught between opposing pressures: rising yields weigh on valuations, yet fresh growth worries tend to push investors toward reliable earnings. The bigger picture for many utilities is still about capital spending — on wires, generation, and storm hardening — and how smoothly those expenses get passed on to customers.
The downside risks are straightforward. Should yields rise further due to hotter inflation data or shifts in Fed policy expectations, rate-sensitive stocks could drop sharply. On top of that, severe weather might trigger unexpected expenses and stir political backlash over relief funding.
Upcoming catalysts are lined up: ISM manufacturing figures drop Monday, Feb. 2, followed by January’s jobs report on Friday, Feb. 6. These releases often spark Treasury shifts, impacting utility traders early on. (Scotiabank)
