Shares of power producers, represented by the Utilities Select Sector SPDR Fund ETF (XLU), experienced a significant decline on Wednesday as U.S. Treasury yields reached multiyear highs. The 10-year Treasury note closed at 4.625%, its highest level since 2007. This increase in Treasury yields resulted in diminished demand for dividend-oriented utility stocks. The S&P 500 Utilities Index closed at its lowest intraday level since March 2021 after a 6% drop over the past five sessions.
NextEra Energy, a major player in the power sector, saw its stock plunge 8.2% on Wednesday following a downward revision of its forecast for full-year run-rate adjusted EBITDA and limited partner distributions. Additionally, NextEra Energy announced the sale of its Florida City Gas utility to Chesapeake Utilities for $923 million in cash. Other notable decliners in the utilities sector during Wednesday’s trading included American Water Works, NiSource, DTE Energy, Eversource Energy, Southern Co., Alliant Energy, Consolidated Edison, PPL Corp., Wisconsin Energy, and Dominion Energy.
The drop in power producer stocks can be attributed to the rise in Treasury yields, which made these dividend-focused utilities less appealing to investors. NextEra Energy’s disappointing forecasts and the sale of its utility also contributed to the market’s negative sentiment toward the sector. Overall, the power producers index experienced a significant decline, reflecting the current challenges faced by the utilities industry in a changing market environment influenced by rising yields and evolving company dynamics.