NEW YORK, Dec. 28, 2025, 1:34 p.m. ET — Market closed
Utilities stocks are heading into the final full trading week of 2025 with two narratives pulling the sector in different directions: the traditional “bond proxy” role that can rise or fall with interest-rate expectations, and a fast-evolving growth story tied to electrification and surging power demand from AI-driven data centers.
With U.S. markets closed for the weekend, investors are using Sunday to assess what mattered most in the last 48 hours—and what could move utilities when trading resumes Monday: December FOMC meeting minutes, year-end liquidity conditions, and the latest winter-storm disruptions that can quickly shift near-term sentiment in utility names.
What just happened: A quiet market, but utilities faced storm-driven selling pressure
Friday’s post-Christmas session was muted overall. All three major U.S. indexes finished just slightly lower, after a strong multi-day run, with Reuters describing a low-catalyst, light-volume environment typical of the holiday period. [1]
Carson Group chief market strategist Ryan Detrick told Reuters the market was essentially “catching our breath” after the rally, while adding that the seasonal “Santa Claus rally” window still had time to play out. [2]
Utilities didn’t enjoy the same calm. A Dow Jones utilities roundup reported that utility stocks were among the top losers Friday as Northeast states braced for a winter storm. [3]
For investors who track the sector via ETFs, Utilities Select Sector SPDR (XLU)—a widely used utilities benchmark—was recently quoted around $42.78 with a previous close of $42.81, according to Investing.com’s data page (reflecting the latest available session pricing while markets are closed). [4]
The rate story: Why utilities remain sensitive heading into the final week of 2025
Utilities’ near-term direction often hinges on the bond market. The group carries heavy capital spending needs (generation, transmission, distribution, resilience), and the sector’s dividend profile can compete with Treasury yields for investor attention.
Two fresh signals over the past 24–48 hours kept rates front and center:
- The same Dow Jones utilities note that flagged storm-related weakness also said investors were mostly betting on a Federal Reserve hold in January. [5]
- Reuters’ “Week Ahead” market preview said the Fed has cut rates by 75 basis points across its last three meetings of 2025, putting the policy rate at 3.50%–3.75%, while investors debate where rates ultimately settle and how quickly. [6]
That debate matters for utilities because “lower yields” can improve financing conditions for big buildouts—and can also make utility dividends look more attractive relative to risk-free alternatives.
Reuters quoted Michael Reynolds, vice president of investment strategy at Glenmede, saying that handicapping the number of rate cuts and the terminal rate is the big issue markets are focused on. [7]
Reuters also cited Anthony Saglimbene, chief market strategist at Ameriprise, pointing to the possibility of market leadership broadening into “more moderately valued areas”—a framing that often includes defensive or income-oriented sectors such as utilities. [8]
The next big catalyst: Fed minutes and key data in a holiday-shortened week
The immediate calendar is unusually important because macro surprises can move rate-sensitive groups quickly when liquidity is thin.
Investopedia’s week-ahead preview highlighted that December FOMC meeting minutes are due Tuesday, alongside a short list of notable economic releases (including pending home sales and weekly jobless claims). It also emphasized the holiday schedule: markets are operating around New Year’s, with a day off later in the week. [9]
For utilities investors, the “minutes” angle is straightforward: any shift in tone around inflation, growth, or labor-market risks can feed directly into Treasury yields and, in turn, relative sector performance.
The structural bull case: AI data centers are reshaping utilities’ growth profile
Beyond rates, utilities are increasingly being repriced around a demand shock: electricity load growth tied to data centers, AI workloads, and electrification.
A recent State Street Investment Management (SSGA) research note argues that U.S. utilities may be entering their “biggest growth cycle in decades,” driven by data centers and electrification. The note says electricity demand is expected to rise by more than 50% from 2020 levels to 2050, with commercial and industrial demand—especially data centers—playing a major role. [10]
SSGA also cites estimates suggesting data centers’ share of electricity consumption could rise sharply by 2028, and that meeting demand may require substantial incremental capacity. [11]
Separately, Reuters Events reported that S&P Global projects utilities’ power supplies to U.S. data centers will jump 22% in 2025 to 61.8 gigawatts, reaching 134.4 gigawatts by 2030—a scale of demand that utilities, independent power producers, and regulators are still working to absorb. [12]
That same Reuters report shows how quickly the “utilities” story is blending with Big Tech’s infrastructure scramble:
- Urvi Parekh, Meta’s Global Head of Energy, described a push for “all forms of power” with emphasis on what can be built faster. [13]
- Elizabeth Adams, Entergy’s Chief Customer Officer, discussed gas additions and solar plans as part of its broader investment approach. [14]
For public-market utilities, the implication isn’t just higher load—it’s a potential multi-year build cycle, larger regulated rate bases (where applicable), and bigger debates over who pays for grid upgrades.
The risk investors can’t ignore: Reliability costs and “higher bills” politics
The AI buildout is colliding with grid reliability constraints and affordability pressures—an area that can affect utilities stocks through regulation, permitted returns, and political scrutiny.
Reuters recently reported that the largest U.S. grid operator, PJM Interconnection, posted record-high capacity prices in its latest auction, a signal Reuters said could mean higher utility bills ahead as data-center demand overtakes supply growth. The report cited PJM’s incoming COO Stu Bresler, who warned the results underscore that demand is outstripping new supply and will require coordinated action involving PJM, stakeholders, governments, and the data center industry. [15]
While capacity-market dynamics differ from state-regulated utility models, the headline risk is similar: faster demand growth can be bullish for investment, but it can also trigger backlash if bills rise quickly.
Weather is back as a near-term headline risk
The other real-time variable is weather-driven disruption—especially in late December, when storms can cause outages, spike restoration costs, and alter short-term trading flows.
Reuters reported that a winter storm disrupted travel across the U.S. Northeast on Saturday, with states of emergency declared in New York and New Jersey and officials urging residents to limit travel amid snow and ice. [16]
That context matters because markets already saw utilities weaken into Friday’s close as the storm approached, per the Dow Jones utilities roundup. [17]
While regulated utilities can sometimes recover storm costs over time (depending on jurisdiction and mechanisms), traders frequently react first to outage headlines and uncertainty—especially in thin holiday markets.
If you’re watching utilities stocks into Monday: What to know before the opening bell
With the exchange closed today, the practical setup for utilities investors heading into Monday is a checklist of “known catalysts” that can hit quickly once liquidity returns:
- Fed minutes (Tuesday) and rate expectations: Anything that nudges the expected path of cuts—or pushes Treasury yields—can ripple through utilities valuations. [18]
- Market breadth and sector rotation: Strategists quoted by Reuters are watching whether leadership broadens beyond the biggest momentum pockets—an environment that can favor steadier sectors. [19]
- Storm aftermath and outage updates: The Northeast storm was already severe enough to trigger official emergency steps; utilities can see headline-driven volatility around restoration progress. [20]
- AI power headlines and capex narratives: Data-center load growth, power procurement deals, and grid buildout plans are increasingly core to the “new utilities” thesis. [21]
- Holiday schedule and thin liquidity effects: End-of-year trading can magnify moves, and this week’s calendar is shaped by the New Year holiday and key macro releases rather than major earnings. [22]
Bottom line: Utilities are no longer just “defensive”—but they still trade like rates matter
Utilities stocks are entering 2026 with an unusual combination: the familiar rate-and-dividend sensitivity that can swing with the Fed narrative, and a structural growth tailwind tied to AI-era electricity demand.
In the near term, Monday’s open will likely be shaped less by company-specific news and more by macro positioning (rates, breadth, liquidity) plus weather headlines. Over the medium term, investors appear increasingly focused on whether utilities can convert data-center demand into durable earnings growth—without triggering a political and regulatory backlash over affordability.
Either way, the sector’s message heading into the final week of 2025 is clear: utilities are becoming a frontline market for the real economy of AI—power, grid capacity, and the cost of keeping the lights on. [23]
References
1. www.reuters.com, 2. www.reuters.com, 3. www.marketscreener.com, 4. www.investing.com, 5. www.marketscreener.com, 6. www.reuters.com, 7. www.reuters.com, 8. www.reuters.com, 9. www.investopedia.com, 10. www.ssga.com, 11. www.ssga.com, 12. www.reuters.com, 13. www.reuters.com, 14. www.reuters.com, 15. www.reuters.com, 16. www.reuters.com, 17. www.marketscreener.com, 18. www.investopedia.com, 19. www.reuters.com, 20. www.reuters.com, 21. www.reuters.com, 22. www.investopedia.com, 23. www.ssga.com
