Utilities Stocks Hold Up as Yields Stay High

In France, a consultation by Odoxa for the Ici network found 61% of respondents dissatisfied with public services and 87% saying it is difficult to reach a human interlocutor, underscoring the political pressure on administrations to restore local access. The same complaint is showing up in utilities, where customer service, bill disputes and outage response have become part of the broader backlash against digital-only service models.

The market backdrop is also turning more challenging. U.S. Treasury yields remain elevated, with the 10-year at 5.12% and the 2-year at 4.79% in recent trading, a level that raises the cost of capital for utility-heavy balance sheets and can weigh on dividend-sensitive stocks. Inflation, meanwhile, is still running hot enough to keep pressure on operating costs and rate cases.

Even so, the utilities sector ETF XLU has been resilient. It closed at 42.65 on Oct. 26, above its 50-day moving average of 41.68 but still below its 200-day average of 43.78, a sign that investors are buying defensive cash flow but not yet bidding the group back to a full trend recovery. U.S. utility names such as NextEra Energy and Southern Company have also traded firmer in recent sessions, helped by the sector’s yield appeal and expectations that regulated returns can absorb some of the higher financing burden.

For investors, the key question is whether utilities can keep passing through the cost of modernization without triggering political pushback. NextEra’s latest filing warned that additional taxes, tariffs and duties on clean-energy equipment could weaken the economics of new projects, while recent project delays and utility-regulation scrutiny in other markets point to the same tension: more infrastructure spending usually means higher customer bills.

That leaves utilities positioned as a defensive play with a policy problem. The next catalysts are rate-case decisions, inflation data and any fresh guidance from major regulated names on how much of the rising cost base can be recovered from customers.