Utilities stocks and sector-related exchange traded funds were among the best performers among U.S. equities Friday, likely advancing on retreating Treasury yields.
On Friday, the Utilities Select Sector SPDR (NYSEArca: XLU) rose 2.3%, Vanguard Utilities ETF (NYSEArca: VPU) gained 2.2% and First Trust Utilities AlphaDEX Fund (NYSEArca: FXU) increased 2.3%.
XLU tracks the Utilities Select Sector Index or the utilities segment of the S&P 500 while VPU follows the MSCI US Investable Market Index (IMI)/Utilities 25/50 Index, which also includes smaller U.S. companies in the utilities sector. Both XLU and VPU track market cap-weighted indices.
On the other hand, FXU follows a smart beta indexing methodology that selects components based on growth factors including three, six and 12-month price appreciation, sales to price and one year sales growth, and, separately, on value factors including book value to price, cash flow to price and return on assets.
The bond-esque utilities sector has strengthened alongside the fixed-income market as Treasury yields rose after the recent selling may have been overdone. Yields on benchmark 10-year Treasury notes fell to 2.86% Friday after trading around 2.917 Thursday – yields fall as bond prices rise.