Squawk on the Street

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Squawk on the Street

Higher Rates Pressures Electric Utilities, Savings and Loans: Strategist

With interest rates on the rise, electric utilities and savings and loans are most at risk for a sell-off, said Cantor Fitzgerald U.S. Market Strategist Marc Pado on "Squawk on the Street."

The electric utilities sector is the most interest-rate sensitive, he said. The smaller savings and loans with large mortgage exposures are also at risk.

Gas utility stocks, however, are less vulnerable to rising rates because they "trade off the commodity itself," Pado added.

While rising interest rates can be bad news for stocks, rates are still at historically low levels; yields on the 10-year Treasury are hovering above 5%.

However, "it's not so much where rates are but the fact that they are rising out of a range and have yet to find a new stabilization area," Pado said. "Until we find that range where people become comfortable and confident, we're going to see disruptions in the market, and that's what we have to avoid in the short term."