Coming out of a disorderly April for markets, the utilities sector (XLU) is now outperforming the S&P 500 (^GSPC). Yahoo Finance Markets Reporter Josh Schafer joins the Morning Brief to give his take on the rally appearing in utilities and the consumer staples sector (XLP).

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This post was written by Luke Carberry Mogan.

Video Transcript

It might be time to get defensive.Utility stocks are outperforming the S and P 500 in Wall Street's recent rally after a tough April, Our own Josh Schaffer is here to break it down.Utility man Josh Shafer.What do we know?Utilities has been rapid.They have been, So the sector is basically a leading over the past month.Right now, it's leading over the past month.We'll leave it at that.No, it's actually interesting taking a closer look at this.Yesterday, I talked to a couple of our strategists, friends that are friends of the show and sort of breaking down what is actually going on in the utility sector.So when you look since April 16th, so really less than a month now the sector is up 12%.That's about all of its year to date gains.It's now the third highest sector in the S and P 500 this year, four year to date gains and normally utilities would be a little bit of a defensive play.Consumer staples have also rallied at a similar time point.There have been a couple indicators there, at least in economic data.We know We've been seeing some weaker data you could into something like jobless claims this morning, right?We're starting to see a little bit of weakness in economic data.You also had movements in the middle of April around rates, right?We had the Fed come out and say that another hike is not necessarily likely.And so that sort of took the 10 year down, the 10 year when the 10 year yield has come down.Utilities have gone up for just about the past year now, but really when you zoom out, the real story was just massive underperformance for utilities over the last year.Uh, utilities Keith Werner over at Cruz told me that utilities, the forward PE ratio compared to the S and P 500 valuation here was at its lowest level since 2009 entering March.So I think investors just largely seeing perhaps an attractive opportunity here and finding another sector that hasn't really joined the market rally to this point.And then could you make that same argument?You would think then, for the out performance that we have seen recently in consumer staples along similar lines?Yeah, So I'm looking at our Wi Fi Interactive right now, if you go to last year.Consumer ST.In the last year, consumer Staples was up 0.2%.You had utilities up 2.5%.Even if you zoom out two years, you're really looking at a similar story here, right?You have consumer staples right there and utilities.So then we flip to the last month what's now outperforming.It's your two sectors that just simply haven't done that well, so, to some sense, it sort of just kind of adds up to a little bit of a OK, a catch up trade.We've talked a lot about different catch up trades over the last year.This is one that hadn't really participated yet.One other thing I want to look up while I have the interactive up here is we take a look at year to date because one of the questions I asked strategists was OK, so what does this mean for market leadership?Are we going to see more from utilities or are we going to see more from Com services or energy?And I thought Kevin Gordon, over at Charles Schwab had a good answer to this, he said.When you take all three of these, you really get three different stories, right.You get a cyclical trade, you get a growth trade and then you get utilities, which is perhaps maybe a little bit more of a defensive play.What does that tell us?I don't really know.That was basically what Gordon told me in sort of a candid way of it.It's hard to really tell where the market's going from that perspective, and I think that really speaks to a lot of the starts and fits we've had with perhaps the broadening trade right.We haven't had a clear broadening trade, largely, probably due to the Fed, and we visit ability there.So until we get more visibility, which we've been saying for a long time now, maybe more starts and fits in different sectors, sort of coming into favour and perhaps out of favour makes a lot of sense.All things on the trailing, rebound for you, too.We did, we did.We don't have to stay all defensive.Brad.That was the takeaway