Chart of the Day - Monday, October 2, 2023

Today’s Chart of the Day was shared by Mike Zaccardi (@MikeZaccardi). The Utilities sector ($XLU) tumbled -4.65% today, marking its worst day since the depths of Covid. It's at a three-year low on an absolute basis and an all-time low on a relative basis ($XLU/$SPY). Rising yields are primarily to blame. Utility stocks have bond-like characteristics in that they're generally stable and often pay a nice dividend. But, for the first time in a while, Treasury Bonds yield more than Utility stocks, making the latter less attractive. The logic is, "Why settle for a 3.7% dividend in $XLU when you could collect a 4.6% yield in a 10-year Treasury note?" Relative weakness from this defensive sector is often perceived as "risk-on" for the broader market. However, it feels like Utilities are sending more of a "risk-off" message right now given the speed and magnitude of this decline."