Advantage Data: Energy mining rebound helps key junk market sectors continue rise

By Paul Deckelman

New York, Feb. 9 – The junk market made it three consecutive weekly upturns in a row last week and its seventh weekly gain in the last eight weeks, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

The market thus continued to build 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, and so far only retreat of the year, and the first in five weeks.

And before that solitary retreat, a majority of the junk sectors had moved higher over four more 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 28 of those more substantial sectors closing in the black during the week ended Friday, with only two sectors in the red.

That was a continuation and a strengthening of the pattern seen during the previous week, ended Jan. 30, when 27 of those sectors had posted gains and just three had shown losses.

Most of the sectors had also risen the week before that, ended Jan. 23, when the split was 24 up and six down, but during the losing week of Jan. 16, some 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, recent losing sector coal atypically showed strength, with oil and natural gas exploration and production also having done very well. With most of the sectors ending up, only wholesale durable goods distributors and insurance carriers posted losses.

Food stores took over as the best year-to-date performer so far, while coal, despite its robust weekly showing, continued as the worst 2015 cumulative performer for a fourth successive week.

Index continues improvement

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

The Merrill Lynch High Yield Master II index rose for a third consecutive week; Friday marked the index’s 15th consecutive daily gain.

On the week, it jumped by 0.964% as of Friday’s close, on top of the previous week’s 0.343% improvement. It was the fourth weekly gain of the year so far against just one weekly loss – the 0.297% setback suffered during the week ended Jan. 16, which had snapped a winning streak of four consecutive upside weeks before that, dating back to mid-December.

The index’s year-to-date return for the new year so far as of Friday was 1.659%. At the end of the previous week, it had been up by 0.688%.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.198%, its low for the year, versus 6.544% the previous Friday and its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues stood at 487 basis points, its tightest spread for the year so far, versus the previous week’s 544 bps spread as well as the 513 bps reading seen on the last day of 2014.

Coal, oil climb

Back on a sector-by-sector basis, Advantage Data meanwhile showed the two energy mining sectors – coal and oil and natural gas – exhibiting rare strength.

Coal mining did the best, soaring by 3.59% on the week as it snapped a streak of four straight weeks during which it had been among the worst performers and accomplished the uncommon feat of having gone from worst to first; in the week ended Jan. 30, it had been the absolute worst major sector with a 1.48% loss. It had also been the cellar-dweller the previous two weeks, ended Jan. 16 and Jan. 23, with losses in those weeks of 5.57% and 0.47%, respectively.

Helped by indications that world crude oil prices had hit bottom, or might soon hit it, most oil and gas sector names were higher on the week in volatile trading, which pushed the sector as a whole up by 3.37%. It was actually the second straight week the energy grouping had been among the Top Five best-performing major sectors, having also been there the previous week with a 0.93% gain – which, in turn, had followed four consecutive weeks in which the sector had been among the biggest losers.

Also showing strength in the latest week were primary metals processing (up 1.45%), petroleum refining (up 1.41%) and printing and publishing (up 1.34%).

It was a solid rebound for the refiners, who had been among the weakest finishers the week before with a paltry 0.09% gain.

Durable goods take a drubbing

On the downside, the wholesale durable goods distributors had the worst showing among the significantly sized sectors with a 0.59% loss.

The insurance carriers sector (down 0.10%) was the only other grouping finishing in the red on the week.

The week’s Bottom Five list of the worst-performing sectors was filled out in the latest week by sectors showing unusually small weekly returns relative to their peers – industrial machinery and computer manufacturing (up 0.10%), holding companies and other investment offices (up 0.14%) and food manufacturing (up 0.19%).

It was the third straight week among the worst laggards for the holding companies, which had also shown losses of 0.06% and then 0.08% the previous two weeks.

Food stores best on year

On a year-to-date basis, with five weeks in the books, the food stores sector (up 4.86%) was the top-performing major sector, moving up one notch in the rankings after having been the runner-up over the prior two weeks.

It thus traded places with the previous kingpin, lodging (up 4.76%), which had held the top spot over the previous three weeks.

Paper manufacturing (up 2.53%) was third-best for a third straight week.

Electric and gas utilities (up 2.41%) and telecommunications (up 2.32%) were in fourth place and fifth place, respectively, both for a second consecutive week.

On the downside, despite coal mining’s strong weekly performance, as noted, the grouping remains the worst-performing year-to-date major sector with a 6.01% cumulative loss, its fourth straight week at the bottom of the shaft.

Holding companies and other investment offices (down 0.12%) fell one notch, to second-worst on the year, from third-worst the week before.

Building construction (down 0.10%) dropped two slots, to third-worst on the year so far, after having been just fifth-worst the year before.

Wholesale durable goods distributors (up 0.02%), the week’s worst finisher, as noted, fell to fourth-worst on the year, despite not having been among the major cumulative losers the week before.

Transportation equipment manufacturing (up 0.05%) meantime moved up by one notch, to just fifth-worst on the year from fourth-worst the previous week.

© 2015 Prospect News.
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