Hiding In The Utilities ETF Until The Market Volatility Retreats

“When investors want to find places to hide in the stock market, the first thing they should do is determine what they want to hide from. Since economic data and overall first-quarter earnings have been good enough to at least support the market’s gains, the sectors that are traditionally seen as defensive aren’t necessarily safe in the current environment. Instead, the market’s current retrenchment appears to be a result of investors looking to cash in some gains just in case the European sovereign debt problems turn into something much worse,” Tomi Kilgore Reports from MarketWatch.

Kilgore goes on to say, “Basically, the idea isn’t to look for something that profit-takers have less incentive to sell. That’s why the utilities sector is likely to be a good place for equity investors to ride out the current market turmoil. And as long as they are looking to park some money for a while, why not pick up a little yield along the way? Of the exchange-traded funds tracking the S&P 500’s 10 primary sectors, the SPDR Utilities Select Sector ETF (NYSE:XLU) has the highest annual dividend yield at 4.17%. In comparison, the yield for the SPDR S&P 500 ETF (NYSE:SPY) is 1.79% and the yield on the 10-year Treasury note was last at 3.554%. In addition, the XLU share price has the biggest percentage loss among the sector ETFs so far this year, and is up just 2.5% since the end of January, while the SPY is up 5% year-to-date and 9% since Jan. 29.”

“One reason for utilities’ relative weakness the last several months is that the sector tends to underperform during a rising interest rate environment. Since the market’s previous rally was based on the belief that the economy will recover faster than most anticipate, investors feared that the Federal Reserve may have to tighten monetary policy sooner than expected,” Kilgore Reports.

See more to the story: HERE

Here are some more details we put together on the SPDR Utilities Select Sector ETF (NYSE:XLU) below:

Utilities Select Sector SPDR (NYSE:XLU)

The investment seeks to replicate the performance, net of expenses, of the Utilities Select Sector Index. The fund invests at least 95% of assets in common stocks that comprise the index. The index includes companies from the electric utilities, multi-utilities, independent power producers, energy traders and gas utility industries. The fund is nondiversified.

TOP 10 HOLDINGS ( 53.88% OF TOTAL ASSETS)  
Company Symbol % Assets
Exelon Corporation Common Stock (EXC) 7.92
Southern Company (The) Common S (SO) 7.45
Dominion Resources, Inc. Common (D) 6.76
FPL Group, Inc. Common Stock (FPL) 5.47
Duke Energy Corporation (Holdin (DUK) 5.40
American Electric Power Company (AEP) 4.50
Pacific Gas & Electric Co. Comm (PCG) 4.34
Entergy Corporation Common Stoc (ETR) 4.22
Public Service Enterprise Group (PEG) 4.09
FirstEnergy Corporation Common (FE) 3.73

Chart forUtilities Select Sector SPDR (XLU)

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