U.S. utility stocks roared higher on Tuesday, notching fresh highs not seen since late 2024, as investors rotated toward defensive assets while Washington’s trade policy outlook became increasingly muddled.
The Utilities Select Sector SPDR Fund XLU climbed 1.8% during Tuesday trading, pushing the benchmark ETF to levels last seen in early December 2024.
That gain cemented a 6.3% year-to-date advance, more of any other S&P 500 sector. It outpaced technology stocks by 15 percentage points and the consumer discretionary sector by 18 percentage points.
| ETF Name | % Change YTD |
|---|---|
| Utilities Select Sector SPDR Fund | +6.32% |
| Consumer Staples Select Sector SPDR Fund XLP | +3.50% |
| Real Estate Select Sector SPDR Fund XLRE | +2.24% |
| Financial Select Sector SPDR Fund XLF | +1.70% |
| Industrial Select Sector SPDR Fund XLI | +1.28% |
| Communication Services Select Sector SPDR Fund XLC | +0.86% |
| Materials Select Sector SPDR Fund XLB | -0.51% |
| Health Care Select Sector SPDR Fund XLV | -2.42% |
| Energy Select Sector SPDR Fund XLE | -6.05% |
| Technology Select Sector SPDR Fund XLK | -8.15% |
| Consumer Discretionary Select Sector SPDR Fund XLY | -11.99% |
Utilities Take The Lead
Still, the utilities sector remains one of the least crowded trades on Wall Street. Despite its 2024 outperformance, the lack of investor interest suggests an underownership of the sector.
In a note shared this week, Bank of America’s latest Equity Client Flow Trends showed that utilities were the only sector to post outflows last week when institutional and retail clients alike bought into 10 out of 11 sectors—marking the widest sector participation in 10 months.
Tuesday’s rally was driven in part by Constellation Energy Corp. CEG, which jumped 11.87%, brushing off weaker-than-expected first-quarter earnings thanks to an optimistic full-year forecast. Vistra Corp. VST gained 4.44%, ahead of its earnings release on Wednesday, while AES Corp. AES added 2.49%.
Looking at the 2025 performance, NRG Energy Inc. NRG leads the utilities sector with a 31.4% YTD gain, followed by Consolidated Edison Inc. ED, up 25.6%, and Exelon Corp. EXC, which has surged 24.5%.
Tuesday’s market backdrop was shaped by fresh uncertainty surrounding U.S. trade relations. During a meeting with Canadian Prime Minister Mark Carney, President Donald Trump floated the idea of renegotiating the United States-Mexico-Canada Agreement (USMCA) and claimed China is eager to return to the negotiating table due to its economic weakness.
Trump said talks with China would happen “at the right time,” adding that the U.S. was not obligated to finalize any deals.
Fed Steady For Now, But All Eyes on Powell
Attention now turns to Wednesday’s Federal Reserve meeting, where economists broadly expect the central bank to hold interest rates steady at the 4.25%-4.5% range.
There’s a 97% probability that the Fed will make no changes to policy in May, according to CME Group’s FedWatch Tool.
Yet, markets are already looking ahead to potential rate cuts. Fed futures pricing implies a 31% chance of a 25-basis-point cut in June and 78% by July. By year-end, there’s an 82% chance the Fed will have delivered three rate cuts.
The post-decision press conference is expected to focus on Fed Chair Jerome Powell‘s response to political pressure, particularly after Trump’s public calls for lower rates, which have reignited concerns about the central bank’s independence.
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