Rising bond yields are roiling the stock market. Utilities have benefited from it, and their upward trend does not seem to be over.

The yield on 10-year Treasuries has soared to 2.83% from 1.51% at the end of 2021 as the Fed raised borrowing costs to curb inflation. The Fed has begun to raise interest rates and is expected to reduce its bond holdings soon-which bodes ill for riskier industries such as industry, consumer discretionary goods and banks, but helps boost defensive sectors such as utilities.

The Fed's move sent the S & P 500 down 7.8% this year, while at the same timeSelected Public Utilities Industry Index ETF-SPDR (XLU.US) $Up 6.3%.

Typically, higher bond yields hit utilities, as investors favor cyclical stocks as economic demand increases. When the economy strengthened, the revenue growth of utility companies did not increase.

However, the current rise in bond yields is the result of the Fed's attempt to slow economic growth, which will weaken profit growth in cyclical sectors and prompt investors to pour into defensive stocks such as utilities. Earnings growth for utility companies should be stable because they can continue to raise prices for residential and commercial customers, which is why Morgan Stanley, a strategist, recently upgraded the utility industry.

Analysts expect utility earnings per share to grow at almost the same rate as the s & p 500's 10 per cent rise in 2023, which could slow if economic growth slows. Demand for renewable energy has contributed to the steady growth of utilities (higher than the low single-digit percentage of the past few years).

State regulators only allow utility companies to achieve a fixed return on their assets, about 10%. When they invest in renewable energy projects, they increase their total assets. As their assets grow, earnings grow almost as fast.

"there is a lot of macro uncertainty right now, and the industry has a lot of attractive features," said Neil Kalton, an analyst at Wells Fargo & Co. If there are some pullbacks, they want to step in and increase their positions.

To$Dominion Resources (D.US) $For example, the company said in its most recent earnings report that it plans to expand its asset base by 9 per cent a year starting this year. This will boost its earnings per share by nearly 7 per cent to $4.38 in 2023, according to FactSet. Its asset expansion will be driven by an 11 per cent increase in zero-carbon power generation, equivalent to $5.4 billion of total annual investment of $7.4 billion.

Shahriar Pourreza, an analyst at Guggenheim, said: "Dominique Energy relies mainly on decarbonization and renewable energy. He has a buy rating on the stock, and its earnings will continue to grow at a rate of 6 to 8 per cent. "

"this could push up the share price of Dow Minnie Energy, because it is not as expensive as it seems. In the case of increased economic uncertainty, it is normal for public utility companies to have high transaction costs. If investors are worried about a recession, Dominion will be good for investors, "said Anthony Crowdell, an analyst at Mizuho.