NEW YORK, Aug 6 (Reuters) - Shares of utilities

companies are presenting investors with a rare bright spot in

the U.S. stock selloff, as turbulent markets prompt a shift away

from the high-flying technology stocks that have led gains for

most of the year.

Utilities has been the top-performing S&P 500

sector since the benchmark index hit its record high on

July 16, rising 4% while the broader index has lost about 7%

following its recent swoon.

The utilities sector is now up more than 15% for the year

and closing in on technology and communication

services, which were last up 17% and 18% in 2024,

respectively, and include megacaps such as Nvidia ( NVDA ) and

Apple ( AAPL ).

A fall in Treasury yields that has come as investors factor

a greater number of interest rate cuts by the Federal Reserve

has made utilities - which pay strong dividends - more

attractive to income-seeking investors. Like Treasuries, the

sector is often desirable during uncertain times, because of

their stable earnings and dividends, investors said.

This year, utilities stocks have also been lifted by

excitement over artificial intelligence because of the expected

increases in electricity use needed to support AI applications.

"They tick a lot of boxes right now," said Chuck Carlson,

CEO at Horizon Investment Services, which owns utilities

including Nextera Energy.

Utilities are often referred to as "bond proxies," for their

strong, stable dividends that compete with Treasury yields.

The utilities sector currently has a dividend yield of

3.15%, compared with the S&P 500's yield of 1.7%, according to

LSEG data. The 10-year Treasury yield of 3.9% is down from

nearly 4.5% at the start of July, as investors expect Fed rate

cuts in coming months.

Utilities historically have been the best-performing sector

in the period that includes the three months before and after

the first rate cut in a cycle, according to an analysis by

Goldman Sachs strategists.

"The start of Fed rate cutting cycles are typically

characterized by defensive sector outperformance, similar to the

rotation that has occurred during the past week," the Goldman

strategists said in a note late on Monday.

Utilities companies are also in the process of putting up

solid second-quarter profit growth, with the sector's earnings

on pace to rise 13.5%, according to LSEG IBES. For the full

year, utilities earnings are estimated to increase 12.4%

compared with 10.5% for the overall S&P 500.

Paul Nolte, senior wealth advisor and market strategist, at

Murphy & Sylvest Wealth Management, said investors are realizing

that utilities' results "might be a little bit better than

expected over the next decade or so as the computing power for

AI ... gets ramped up."

"The huge energy need is going to be something that could

wind up in the bottom line for a lot of utility companies,"

Nolte said.