Utilities Stall as Top Grades Claim Just 23.5% of XLU

EasyAlpha grades the stocks in the sector against their industry peers, and inside Utilities Select Sector SPDR Fund (XLU), an exchange-traded fund that tracks the sector, only 23.5% of the graded weight sits in companies graded A or B. On Monday, October 26, 54.8% of the sector's S&P 500 members advanced, with the cap-weighted sector finishing 0.0% while an equal-weighted basket closed +0.1%. Gains in PG&E Corp, which closed +1.7%, were balanced by pullbacks in names like American Water Works, which finished -0.8%. The sector stalled as broader stock benchmarks advanced, leaving defensive groups sidelined while chipmakers and artificial intelligence shares led market gains.

The quiet session stood out across the broader market, where 9 of the 11 sectors rose on Monday, October 26. While cyclical and high-momentum stocks led the market climb, defensive sectors lagged as utilities were viewed as rate-sensitive shares ahead of upcoming central-bank policy guidance. That dynamic kept the group subdued throughout the session, with utility shares trading fractionally lower into the afternoon.

EasyAlpha grades each company against its industry peers. Companies graded A or B have stronger fundamentals, and historically they have carried a lower risk of large drawdowns than companies graded D or E. Because less than a quarter of the fund sits in those top two tiers, the sector's traditional reputation as a low-risk haven does not reflect uniform quality across the group. The majority of holdings sit in companies graded C, D, or E, where historical resilience has been weaker.

At Monday's close, XLU finished at $42.56, remaining 0.0% on the session. That stillness follows a recent rebound, with the fund +7.7% over the past month. Over wider stretches, however, the fund remains under sustained pressure. The fund sits at -3.1% over the past 100 sessions and -53.4% over the past twelve months. Investors tracking the sector through Utilities Select Sector SPDR Fund pay an annual expense ratio of 0.08% to access $21.3 billion in assets that remain heavily concentrated in those lower quality tiers.