Utility Sector May Lose Its Power Over Investors

Rising market interest rates are giving utility stock holders something they have not had for a long time: a choice. What they need to know now is whether it's the right one.

Utility stocks were the only game in town for yield-hungry investors. With market interest rates at record lows, investors desperate for income streamed into utility stocks, sending the Dow Jones Utility Index up over 30% since April 2003.

The rise in the 10-year Treasury yield from a March low of 3.65 to its current level near 4.38%, however, has given utility investors a long-awaited opportunity to switch to bonds. The allure of higher yields has already knocked the utilities index from its one-year high of 283.47 on April 2 -- which happens to be the date of the blowout April jobs report -- down to 272.34. ...