XLU - Entergy: Big Yield But Bearish Momentum Heading Into Q4 Earnings

2024-02-20 11:10:55 ET

Summary

• Rising interest rates pose a challenge for bond proxies like debt-heavy Utilities sector stocks, and that has been reflected in performance figures from a year ago.
• Entergy Corporation stock's momentum is soft, and a price turnaround is needed before becoming optimistic.
• Entergy Corporation earnings, valuation, and dividend yield forecasts are positive, however, but attention must be paid to price action.
• Should the bulls stabilize the Entergy stock trend, then a buy on valuation could be likely over the coming months, but I reiterate my hold rating for now.

Interest rates have bounced rather sharply from their late-2023 lows. The yield on the benchmark US 10-year Treasury note (US10Y) is now about 4.28%, higher by almost a half percentage point in the last two months. That is bad news for bond proxies in the equity space, namely debt-heavy Utilities sector stocks. Zoom out to the past year, and utilities big and small have generally struggled, illustrated in the S&P 500 Index (SP500) performance heat map below....

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