Markets & Finance

Banc of America Lowers Outlook on Energy Stocks

Bank of American says a review by Moody's on Calpine (CPN) debt will further depress stocks in the sectors.

Analyst Daniel Tulis says Moody's review of Calpine debt rating, back to junk, should cause negative reaction for the group. He sees increasing pressure from credit agencies raising standards, making returns more challenging. Tulis says EPG's response to rising credit bar puts company in stronger position. He says it is incumbent on companies with higher leverge of financing needs to make similar moves to deliver in the post-Enron environment.

Tulis sees deeply discounted merchant players, higher-ylding defensive stocks as the appropriate way to invest in the sector. Duke Energy (DUK), American Electric Power (AEP) and Dominion Resources (D) are less volatile, he says.

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