In an Alert to members yesterday, we noted the impact on small-cap stocks and utilities as the 10-Year Treasury yield continued to move even higher. After closing at 4.69% last night, up sharply from 3.3% in early April, we are seeing another leg up for that yield, placing renewed pressure on equities this morning.
In that same Alert, we laid out our game plan for Action Alerts PLUS name American Water Works (AWK) , which along with other utilities have been under pressure since early August, but especially so since the back half of September.
While AWK shares are oversold, a technical look shows there is no real support for the shares below $120, where they closed last night, until the $109 level and potentially lower.
That prospect of further downside from current levels as we move into a seasonally slow time of year for the largest U.S. water utility and risk of a further rise in the 10-Year Treasury yield has us taking our lumps with the position, but also moving to limit further downside.
We will be reviewing other interest rate-sensitive positions in the portfolio with an eye toward the technicals, including the SPDR Gold Shares ETF (GLD) . Gold fell for the sixth straight trading session yesterday to its lowest in nearly seven months, hit by the combination of the strong dollar and the upward move in rising U.S. interest rates.
After you receive this Alert, we will sell all 920 shares of American Water Works at or near $119. This will close out the portfolio's AWK position with this last set of shares returning 18.9%.