Advantage Data: publishing, chemicals led key sectors lower last week; high-yield index slides

By Paul Deckelman

New York, Feb. 16 - High-yield industry sector returns were mostly lower in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc. - the fourth consecutive week on the downside, as the junk market continued to move further away from the solid advances seen over the first two weeks of 2010.

Those most recent four weeks have represented a shocking contrast to the pattern of strength seen before that - a 10-week winning streak which dated from mid-November through mid-January. Looking at a longer timeframe, there still have been only seven downturns in the last 25 weeks and eight in the last 31 - but the momentum seems to have clearly shifted to the downside, with no end to the retreat in sight.

In the latest week, among the more significantly sized broad-industry sectors - as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked - bonds of publishing and chemical manufacturing companies turned in the worst showings, both in excess of at least a two-percentage-point loss.

Other weak sectors with losses well over one percentage point were miscellaneous retailing, real estate, insurance carriers and lodging.

With all sizable sectors in the red, bonds of transportation equipment manufacturers, vehicle-rental operators, building construction companies and non-depositary financial institutions were, relatively speaking, not-such-bad performers, posting small losses of less than half a percentage point.

Of the 71 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, 62 had negative returns and just nine had positive results on the week. That was a clear continuation and strengthening of the trend seen in the previous week, ended Friday, Jan. 29, when 49 sectors had finished in the red and 22 were in the black.

All 30 of the significantly sized sectors had negative returns in the latest week, with none in positive territory, as noted. That extended the previous week's 27-3 negative breakdown.

On a statistical basis, the junk market's year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, slid for a fourth straight week, moving further away from the peaks which it had hit while rising smartly in the first two weeks of 2010, and finished a trading week in the red for the first time this year.

Publishing gets pummeled

The worst-performing major sector on the week was publishing, which swooned by 2.94%, followed by chemical manufacturing (down 2.65%).

It was the second consecutive week in which the publishers had been among the worst finishers, following the sector's 0.81% drop in the previous week, ended Feb. 5. However, the chemical makers had been among the relatively better names in each of the prior two weeks, with only a small loss (0.06%) in the Feb. 5 week and a 0.23% gain the week before that, ended Jan. 29.

Other major-sector downsiders in the most recent week included miscellaneous retailing (down 1.75%), real estate (down 1.70%), insurance carriers (down 1.43%) and lodging (down 1.42%).

The retailers, real estate and lodging had all been among the worst performers the week before, posting losses of 1.74%, 0.67% and 1.24%, respectively. Retail and lodging were also among the biggest laggards in the Jan. 29 week, with respective losses of 0.55% and 1.25%. Insurance had a 1.52% loss that week as well, making it two weeks out of the last three near the bottom for that sector.

Transportation equipment, car rental drive higher

As noted, none of the significantly sized sectors had a positive return this past week, although some had relatively small losses versus their peers. These included transportation equipment manufacturing (down 0.11%), automotive services - i.e., vehicle rental - (down 0.12%), building construction (down 0.24%), nondepositary financial institutions (down 0.29%), metals mining (down 0.41%) and wholesale distributors of durable goods (down 0.41%).

Automotive services had been among a small handful of major sectors actually finishing in the red the previous week, when it posted a 0.25% gain. Transportation equipment (down 0.05%) and durable goods distributors (down 0.06%) had also been considered among the prior week's leaders.

Financials still tops for year

On a year-to-date basis so far, financial sectors continue to show the strongest performance among the significantly sized sectors, led by depositary institutions (up 4.81%), followed by brokers and exchanges (up 3.70%), non-depositary institutions (up 3.66%), insurance carriers (up 2.23%), and investment and holding offices (up 1.71%).

Other big cumulative gainers, with six weeks now in the books and 46 to go, include building construction (up 1.42%), transportation equipment makers (up 0.94%), precision instrument manufacturers (up 0.92%) and amusements (up 0.89%).

The number of major sectors which have fallen into the red jumped to 13 from just three the week before.

The worst 2010 performers, so far, were miscellaneous retailing (down 4.54%), business services (down 2.79%), real estate (down 2.18%), telecommunications (down 1.80%), publishing (down 1.73%) and lodging and electronics manufacturing (each down 1.56%).

Key market indicator in the red

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to show a noticeable retreat in the latest week.

It was the fourth down week in a row, as noted - having coughed up all of their early gains and then some to close on Friday showing a year-to-date loss of 0.357% - the first such weekly close in the red this year - down from the positive 0.891% return at the close of the previous week, ended Feb. 5. The peak level for 2010 so far was 2.292%, notched on Thursday, Jan. 14.

The average price of a high-yield issue covered by the Master II stood at 94.125 at Friday's close, with a spread to worst of 703.608 basis points over comparable Treasuries and a yield to worst of 9.41% - versus a price of 95.489, a spread of 686.663 bps and a yield of 9.077% at the end of the previous week.

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