Utilities Select Sector Fund yields 2.49% as Fed cut odds reach 70%
Fed funds futures imply a 70% probability of a June rate cut and 80.4% odds by July, boosting outlook for capital-intensive sectors. Utilities Select Sector SPDR Fund offers a 2.49% dividend yield and carries a Zacks ETF Rank of #2, positioning it for gains on lower borrowing costs.
1. Rising Fed Rate Cut Odds
Headline CPI slowed to 2.4% year-on-year in January, with core CPI at 2.5% — readings not seen since April 2025 and April 2021 respectively. These data have driven federal funds futures to price in roughly a 70% probability of a June 2026 rate cut and 80.4% odds of easing by July, underpinning expectations for lower borrowing costs.
2. Benefits for Utilities Sector
The utilities sector is highly capital-intensive, meaning reduced interest rates can significantly lower financing expenses for infrastructure and maintenance spending. As a traditionally low-beta, defensive segment, utilities also tend to outperform during periods of market volatility, offering investors stable income and downside protection.
3. Utilities Select Sector SPDR Fund Details
Utilities Select Sector SPDR Fund carries a Zacks ETF Rank of #2 and delivers a 2.49% dividend yield. Among its peers, Vanguard Utilities ETF yields 2.51% and iShares U.S. Utilities ETF yields 2.05%, with all three funds rated as buys and positioned to benefit from an anticipated rate-cut cycle.