In a market that continues to be driven by the strength of the technology sector, US utilities are underperforming. This divergence in sector performance is becoming increasingly apparent as tech stocks surge while utilities struggle to keep pace.

One notable player bucking the trend is TLN, which is outperforming other utilities like CEG and VST today. TLN seems to be catching up after falling behind in the past week. Activity across the utilities sector has picked up significantly, with a skew towards the buyside, indicating strong interest from institutional investors. Flows from long-only funds have been particularly active, spanning across all sub-sectors within utilities.

Midstream Sector Struggles After KMI Earnings Miss

In the midstream space, Kinder Morgan Inc. (KMI) has faced challenges following its Q3 earnings report. On Wednesday night, KMI reported earnings that missed analyst expectations and lowered its guidance. The key factors behind this miss were lower-than-expected commodity prices and delays in starting up the company’s renewable natural gas (RNG) facilities. However, there were some positives: contributions from natural gas transmission and storage were higher, partially offsetting the missed expectations.

KMI’s capital expenditures for Q3 were $657 million, below the consensus estimates of $841 million and $825 million, which is being viewed as a positive development. On the power demand side, KMI now sees significant opportunities, projecting a potential increase from 20 Bcf/d to 25 Bcf/d in total demand.

Despite the earnings miss, flows in KMI have been driven by long-only demand, with hedge funds stepping in to supply on the stock’s weakness.

REITs Face Pressure from Weak Industrial Earnings

Elsewhere in the market, Real Estate Investment Trusts (REITs) have been the worst performers, largely due to disappointing industrial earnings. This underperformance highlights the growing pressure in sectors that are more sensitive to economic cycles and real estate fundamentals, particularly in industrial spaces.

Key Takeaways

1. Tech Leads the Market: While utilities lag, tech stocks continue to outperform, driving the broader market higher.
2. TLN Outperforms: TLN is seeing a rebound after underperforming last week, outpacing peers like CEG and VST.
3. Midstream Under Pressure: KMI’s earnings miss and guidance cut weigh on the midstream sector, though power demand presents an upside opportunity.
4. REITs Struggle: Weak industrial earnings are dragging down REITs, making them one of the worst-performing sectors.

As market dynamics continue to evolve, it will be interesting to see if utilities can regain their footing or if the tech-driven rally will further widen the performance gap between sectors.