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“Half of tradition is a lie.” ― Stephen Crane
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Yields are higher again this morning, which means stocks are trading lower. It’s gotten to the point where we picture Bill Murray smashing the alarm clock which is playing “I Got You Babe”. The 10-year yield is nearing 4.75% while the 30-year yield has broken above 4.85% as it joins the list of points on the yield curve that are at their highest levels since 2007. The only data on the economic calendar this morning is the August JOLTS report which is expected to show a modest increase in job openings from 8.83 million to 8.90 million.
As rates rise, Utility stocks have been decimated, and yesterday the S&P 500 Utility sector closed 3.2 standard deviations below its 50-day moving average which is the most oversold reading for the sector since February 2021, and it isn’t often that you see the sector get this oversold.
In the short-term, the sector’s 11% decline is the steepest five-day decline since last June, but the difference between these two periods is that back in June 2022, the S&P 500 was down over 10% during that same five-day span while it’s only down 1% in the current five-day span.
The chart below shows the five-day performance spread between the S&P 500 Utility sector and the S&P 500. After adjusting for the S&P 500’s performance, the Utility sector is underperforming the S&P 500 by the widest margin over a five-day period since October 2002!
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