Advantage Data: Food stores feed continued junk market major-sector rally; construction off

By Paul Deckelman

New York, May 5 - The high-yield market recorded its seventh straight weekly advance last week, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Of the 59 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 50 finished in the black during the week ended Friday, while nine sectors were in the red.

That was off only slightly from the bullish trend seen the week before, ended April 25, when 52 sectors posted gains, six had negative results and one was unchanged, registering neither a gain nor a loss.

A majority of the sectors have now been on the plus side in 16 weeks out of the 18 weeks so far this year, versus just two weeks in which more sectors were down than up - in the weeks ended Feb. 3 and March17.

A separate, more focused selection of just the 30 most significantly sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding, also mostly held its prior gains this past week, with 26 of the 30 closing in the black, while four finished in the red.

That was off just a little from the previous week, when 28 of the sectors had shown gains, just one had posted a loss and one was unchanged.

That more select grouping of the larger sectors generally moves up or down in tandem with the overall market, although from time to time there is a rare divergence, as happened during the week ended March 7, when those key sectors were down on the week while the overall sector roster showed more gains than losses. Those significantly sized sectors have now mostly shown gains in 15 weeks since the start of the year, versus three downturns.

In the latest week, the food stores grouping was the best performer among the significantly sized sectors, while building construction did the worst.

The paper manufacturing sector remained on top on a year-to-date basis for a fourth straight week, and a fifth week out of the last six, while the coal sector remained buried down at the bottom for a ninth straight week, and a 13th week out of the last 14.

Index extends gains

Statistical indicators of general market performance meanwhile were higher versus their levels the previous Friday for the first time after three weeks of having been mixed.

Among those indicators was the widely followed Merrill Lynch High Yield Master II index, which posted a seventh straight weekly gain after two straight weekly losses in early March. It rose by 0.249%, following the previous week's 0.198% gain.

The index has now seen 14 weekly gains in 2014 against four losses. In 2013, the index showed 33 weekly gains against 19 losses, while in 2012, it had notched 40 gains and 12 losses.

As of Friday, the index's year-to-date return had risen to3.804%, its fifth consecutive new peak level for 2014. It was up from the previous Friday's 3.546% return. In 2013, the index had ended at 7.419%, its high point for the year, although that was well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 104.702179 on Friday, up from 104.5795 the previous Friday, although it remained down from the 104.915754 seen on Feb. 28, its high point for the year. However, it stayed well up from its low for the year so far of 103.24599, set on Feb. 4, and up as well from 103.3161, where it had ended 2013.

Its yield to worst stood at 5.22%, up from the previous Friday's 5.187%. Those levels remained up from its lowest level for the year so far, 5.179%, recorded on April 24. All of those levels were still well down from the index's high yield for the year of 5.735%, set on Feb. 4, and down as well from 5.671% at the end of 2013.

Its spread to worst over comparable Treasury issues stood at 389 basis points on Friday, slightly wider than 386 bps the prior Friday. It was also wider than its tightest level seen so far this year, the 383 bps recorded on April 3 and again on April 22. The spread was well in versus its wide point for the year so far, 444 bps, set on Feb. 4, as well as the 418 bps spread seen on the last day of 2013.

Food stores ring up gains

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of food stores up by 0.92% in the latest week, the best of any of the significantly sized sectors. It was the grocery group's third consecutive week among the best performers, having been there the week before with a 0.43% return, and a 0.19% return the week before that, ended April 18.

Also showing strength this week were electric and gas utilities (up 0.64%), real estate (up 0.35%) and the paper manufacturing and precision instrument manufacturing sectors, each of which was up by 0.32%.

It was the utilities' second straight week among the Top Five best-performing sectors; in fact, they had led all of the sizable sectors in that previous week with a 0.54% gain.

In contrast, real estate had been the single worst-performing major-sized sector in that previous week, and the only one actually in negative territory, with a 0.08% loss.

On the downside, building construction had the worst showing this past week, losing 0.09%.

Other significantly sized sectors showing losses, however slight, included wholesale durable goods distributors (down 0.07%) and the automotive services and coal mining sectors (both down 0.04%).

Chemical manufacturing (up just 0.01%) rounded out the latest week's Bottom Five list of worst performers.

It was the second straight week among the underachievers for coal, which had also been there the week before with an anemic 0.02% gain.

Papermakers hold YTD lead

With 18 weeks in the books for 2014 so far, the paper manufacturing sector was showing the best year-to-date cumulative return among the significantly sized sectors, up by 6.21%. It was the papermakers' fourth consecutive week at the top and the fifth week in the last six that they have held that lofty position.

The electric and gas utilities (up 5.64%), powered as they were by a second consecutive good weekly showing, as noted, climbed to second-best on a year-to-date basis, even though they had not been among the year-to-date leaders the week before.

Petroleum refining (up 5.22%) fell by one position to just third-best on the year, after having been in the runner-up spot for three consecutive weeks before that.

Lodging (up 4.77%) was fourth-best and precision instrument manufacturing (up 4.66%) was fifth-strongest on the year so far, even though neither sector had been among the leaders the week before.

On the downside, coal mining continued to languish at the bottom with a 0.64% loss on the year, as it remained the absolute worst performer among the major sectors year to date for a ninth straight week and for a 13th week in the last 14. It remained the only key sector showing a loss for the year.

Real estate (up 2.20%) was second-worst for a second consecutive week.

The financial broker, dealer and exchanges sector (up 2.40%) fell to third-worst on the year, after having been fifth-worst the two weeks before that.

Non-depository credit institutions (up 2.87%) and miscellaneous retailing (up 2.98%) fell to fourth- and fifth-worst on the year, respectively, even though neither had been among the absolute worst laggards the week before.

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