Advantage Data: Food stores’ surge helps key junk market sectors continue upturn

By Paul Deckelman

New York, Feb. 2 – The junk market continued its winning ways last week, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

It posted its second weekly advance in a row and its sixth gain in the last seven weeks, building on its recently robust momentum, which had been briefly interrupted by a relatively uncommon overall market downturn in the week ended Jan. 16 – its first retreat of the year and the first in five weeks.

Before that downturn, a majority of the junk sectors had moved higher over four consecutive weeks, recovering from an early December two-week losing streak.

A subset of the 30 most significantly sized sectors (out of the total of 58 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe), as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding, showed 27 of those more substantial sectors closing in the black during the week ended Friday, with only three sectors in the red.

That was a continuation and a strengthening of the pattern seen during the previous week, ended Jan. 23, when 24 of those sectors had posted gains and six had shown losses.

In contrast, during the Jan. 16 week, 16 of those larger sectors had ended in negative territory, 13 were in positive territory and one sector had been unchanged, showing neither a gain nor a loss on the week.

In the latest week, the food stores sector posted a strong gain on the week. Coal mining, on the other hand, was the worst performer for a third straight week and for the fifth week in the last six.

Lodging remained the best year-to-date performer so far for a third straight week, while coal continued as the worst 2015 cumulative performer, also for a third successive week.

Index continues improvement

Other statistical indicators of general market performance, meanwhile, were mixed last week versus where they had finished out the previous week, after having been higher across the board the week before.

But one of those indicators, the Merrill Lynch High Yield Master II index, shrugged off whatever headwinds the other indicators may have been affected by, rising for a second consecutive week; Friday was the index’s 10th consecutive daily gain.

On the week, it rose by 0.343% as of Friday’s close, on top of the previous week’s 0.408% improvement, and in clear contrast to the 0.297% loss suffered during the week ended Jan. 16, which had snapped a winning streak of four consecutive upside weeks dating back to mid-December.

The index’s year-to-date return for the new year so far as of Friday was 0.685%, its high point for the year. At the end of the previous week, it had been up by 0.408%, while it had been down by 0.064% on the year closing out the week ended Jan. 16.

It had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.544%, versus 6.603% the previous Friday and its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues stood at 544 basis points, wider than the previous week’s 538 bps spread as well as the 513 bps reading seen on the last day of 2014.

Grocers perform well

Back on a sector-by-sector basis, Advantage Data meanwhile showed the food stores sector having had the best showing among the larger-sized groupings, jumping by 2.53% on the week.

It was the third consecutive strong showing by the grocers, which had also been up by 0.88% during the week ended Jan. 23 and by 0.37% the week before that.

Also showing strength in the latest week were oil and natural gas exploration and production (up 0.93%), electric gas and utility services (up 0.89%), transportation equipment manufacturing (up 0.84%) and telecommunications (up 0.79%).

It was the second straight week that telecom was among the Top Five best-performing sectors, having also been there the week before with a 0.73% gain.

On the other hand, oil and gas and transportation equipment manufacturing had each been among the worst-finishing sectors the previous week – the second straight week for the transportation equipment makers, who had been there the prior week with a 0.41% loss, and the fourth week in a row for the energy names, which had been down by 0.11% the previous week.

Coal slide continues

On the downside, coal mining was the worst-performing significantly sized sector, with a 1.48% loss.

It was the coal grouping’s 11th consecutive week among the worst performers and its third consecutive week, and fifth week out of the last six that it was the absolute worst sector of all. It had lost 0.47% during the week ended Jan. 23 and 5.57% during the week ended Jan. 16.

Other sectors showing losses were lodging (down 0.44%) and holding companies and other investment offices (down 0.08%). The Bottom Five worst-performing sectors also included depository financial institutions and petroleum refining, both of which were up by 0.09% on the week.

The holding companies sector was among the laggards for a second straight week, having also been there the week before with a 0.06% loss.

Lodging, however, had been among the best performing sectors over the previous two weeks, with gains of 0.75% and before that, 1.71%.

Year-to-date performers

Despite its subpar showing for the week, lodging remained on top on a year-to-date basis for a third straight week, with a 4.61% cumulative return, followed by the food stores – the best weekly performer, as noted – in the runner-up slot for a second consecutive week with a 4.25% gain on the year.

Paper manufacturing (up 2.14%) was third-best on the year so far for a second week in a row.

Electric and gas utilities (up 2.10%) improved to fourth-best on the year after having been only fifth-best for a second straight week the week before.

Telecommunications (up 1.56%) – also one of the stronger performers on the week, as noted – was fifth- best on the year, despite having not been among the cumulative leaders the week before.

On the downside, the coal mining sector – continuing as the week’s worst performer, as noted – was also the worst year-to-date performer for a third straight week, showing red ink of 5.04%.

The oil and gas sector (down 1.98%) was the second-worst cumulative performer, also for a third straight week.

Holding companies and other investment offices (down 0.62%) was the third-worst sector year to date, despite having not been among the worst cumulative performers the week before.

Transportation equipment manufacturing (down 0.40%) improved, relatively speaking, to just fourth-worst on the year from third-worst the week before.

That, in turn pushed building construction (down 0.38%) up by one notch, to just fifth-worst on the year from fourth-worst the week before.

© 2015 Prospect News.
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