Six weeks after the Fed's first hike since 2023, utilities are up 3.4%. All 11 big banks are down.
Published · 1 min read
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Since the Fed raised rates on 16 September, S&P 500 utilities rose 3.4% and 11 big banks and brokers fell 7.3%, every one of them, while the S&P 500 gained 2.0%.
The Fed raised rates on 16 September for the first time since July 2023. From the close before that decision to 28 October, the S&P 500's 31 utilities rose 3.4% weighted by size, and 11 big banks and brokers fell 7.3%. All eleven fell. The S&P 500 gained 2.0%.
That is close to the reverse of the usual rule of thumb. Utilities are often treated as bond substitutes that fall when rates rise, and banks are expected to earn more because their loan rates reprice faster than their deposits.
Utilities up, banks down
26 of the 31 utilities closed higher on 28 October than on 15 September. $PNW gained 10.5% and $CNP 9.5%, while the largest, $NEE, finished flat. On the other side, every one of the big banks and brokers lost ground:
| Stock | 15 Sep to 28 Oct |
|---|---|
| $SCHW | −17.7% |
| $BAC | −14.6% |
| $C | −8.9% |
| $MS | −7.8% |
| $WFC | −6.7% |
| $JPM | −3.7% |
The financials sector as a whole fell 1.2%. Real estate, the other sector usually tied to rates, fell 1.8%.
The two decision days
Financials were already weak on the day of the hike itself. On 16 September only 4 of the 75 financials in the S&P 500 rose, and the sector fell 1.6%, while utilities were flat.
Wednesday went the other way. On 28 October the Fed held its rate at 3.75% to 4%, and two officials, Lisa Cook and Beth Hammack, voted for another quarter-point hike. The S&P 500 rose 0.3% that day, but utilities were its worst sector, down 0.9% with only 6 of 31 rising.
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Sources
- Fed hikes, hints at more: 7 takeaways from the September FOMC — investingLive
- Fed Raised Interest Rates to 3.75%-4.00%: What It Means for Markets — Admiral Markets
- Fed keeps interest rates unchanged, but two officials dissented in favor of a rate hike — CNN
- Utility stock performance in a rising interest rate environment — S&P Global Market Intelligence
- Do Bank Stocks Go Up When Interest Rates Rise? — The Globe and Mail
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