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Eversource Energy is largely a pure-play transmission and distribution business. It provides electric service and natural gas to 4.4 million customers in Massachusetts, Connecticut, and New Hampshire. The utility has almost 60,000 circuit miles of transmission lines, of which about 30% are underground. Eversource's core subsidiaries are: Connecticut Light & Power, which serves most of Connecticut; Yankee Gas Services Co.; Public Service Co. of New Hampshire, which serves three-quarters of New Hampshire; NSTAR Electric, which serves eastern Massachusetts; NSTAR Gas, which serves customers in Boston and eastern Massachusetts; and Aquarian Water Co., which serves part of southern Connecticut. We note that many residences in Eversource's service region continue to use heating oil to heat their homes, which tightens the utility's demographic growth. In 2023, electricity transmission accounted for 42% of earnings, distribution for 40%, natural gas for 15%, and water distribution for 2%. Eversource recently completed a strategic review of its offshore wind investments, and is selling three wind assets and looking for a buyer for its water business. It is targeting carbon neutrality by 2030, in line with other pure-play transmission utilities. The company's market cap is about $23 billion.

The major indices are lower at midday. Wall Street is waiting on Nvidia earnings due after the close. Some big retailers are reporting and giving a sense of consumer spending. The yield on the 10-year Treasury note is 4.40%. Oil is up at $70 per barrel. Bitcoin continues to rally and has hurdled $94,000.

WEC Energy Group's electric and gas utility businesses serve electric and gas customers in Illinois, Michigan, Minnesota, and Wisconsin service territories. The company also owns a 60% stake in American Transmission Co. WEC's asset mix is approximately 48% electric generation and distribution, 36% gas distribution, 10% electric transmission, and 6% unregulated renewable energy.

After almost two years of inversion, the yield curve has returned to its normal upward-sloping shape. This has important implications for bond investors and for the economic outlook. In April 2023, two-year Treasury Note yields were about 100 basis points (bps) above 10-year yields and, according to the textbooks, signaled an upcoming recession. Now they are about 15 bps below. There are a few reasons for this change, and they point toward a steeper upward-sloping curve (and an expanding economy) in the next few quarters. First of all, U.S. economic trends have been positive in recent months. Fixed-income investors have moved away from fears of deflation and are again seeking a premium in yields versus inflation. That has lifted rates at the long end of the yield curve. Second, the Fed has is finally in front of inflation and can afford to lower short-term rates. The central bank built a wide cushion, or a gap, between fed funds and core PCE in order to push inflation back toward 2.0%. This is all well and good, but if the Fed's gap is too wide for too long (we think a 150-bps gap is desirable, versus the current 200 bps), the central bank risks tipping the economy into recession. The Fed is now trying to reduce that gap without letting inflation rekindle, and has lowered rates twice this year. We think a third cut is coming in December, and then two more in the first half of next year, bringing fed funds to the 3.5% range. Assuming lower rates keep the economy in growth mode, longer-term rates should remain stable and the yield curve should continue to slope upward.