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The Fed has these stocks seeing red

As investors eye a December rate hike, one group of stocks could be in real trouble.

The S&P 500 utilities sector has been the worst-performing sector of late, losing almost 6 percent in one month. Since utilities stocks pay high dividends, they are particularly sensitive to rising interest rates. And as more traders begin to expect a move from the Federal Reserve next month, Gina Sanchez of Chantico Global said this is only the start of a sell-off in utilities.

"The market is clearly pricing [a rate hike] in. We've gone from a 50-50 expectation to 60, now 70 percent expectation priced into the Fed funds futures markets, which basically says this has now become a foregone conclusion in the markets," Sanchez said Tuesday on CNBC's "Power Lunch."

Markets have seen the probability of such a decision increase following less-dovish rhetoric from Fed officials and a strong October jobs report.

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However, Sanchez said it isn't time to write off utilities stocks quite yet.

"The question at the end of the day is, are they going to pay you more than bonds will? I think they're probably going to continue paying more," she said. "They're paying well over 3.5 percent, 3.6 percent, that's a pretty hefty dividend yield. And so I do think it will be awhile before bonds are going to get over that."

One name that looks particularly attractive is Duke Energy, said Eddy Elfenbein, editor of the Crossing Wall Street blog. Duke Energy has fallen more than 21 percent year to date, but Elfenbein said the stock could be a good portfolio addition given its high dividend yield.

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"The yield on this is 5 percent, I don't see bonds getting anywhere near this in 2016," he said on "Power Lunch." "You're not going to get the growth of it. Investors shouldn't expect that. But a company like Duke Energy really provides a solid income foundation for a portfolio."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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