Advantage Data: Lodging again leads as junk key sectors continue rebound; coal off again

By Paul Deckelman

New York, June 1 – The junk market moved higher for a third consecutive week last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That three-week upturn follows a two-week losing streak, which in turn had halted a six-week winning streak dating back to mid-March.

With 21 weeks now in the books so far this year, last week’s rise was the 16th weekly improvement recorded so far this year, versus five weeks on the downside.

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 25 of those more sizable sectors closing in the black during the week ended Friday, with four sectors ending in the red and one sector unchanged on the week, showing neither a gain nor a loss.

That strengthened the trend seen the week before, ended May 22, when 22 sectors had shown gains and eight had suffered losses.

Lodging turned in the best performance of any of the significantly sized sectors for a second straight week, while coal mining had the biggest loss among any of them for a fifth consecutive week.

Not surprisingly, coal was also the worst year-to-date finisher among the big sectors for a 20th successive week, while the lodging sector remained on top year to date for a 13th week in a row.

Index bounces back

Other statistical indicators of general junk market performance were also higher across the board last week versus where they had finished out the previous Friday.

That was a change from the May 22 week, which had been its second week in the previous four on the downside. Before that, the indicators had been mixed for two consecutive weeks and for four weeks out of the previous five, after having risen week over week for three weeks before that, dating back to late March.

After having been lower the week before, the Merrill Lynch High Yield Master II index ended higher last week for its third week in the last four, and for its ninth week out of the last 11.

The index rose by 0.159% on the week, after having lost 0.014% the week before.

That brought its year-to-date return up to 4.062% as of Friday, its fourth consecutive new peak level of 2015. The year-to-date return the previous Friday had been 3.896%.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst had fallen to 5.948% from 6.012% the Friday before. While it remained above the 5.843% seen on Feb. 27, its low for the year, the yield was still well below its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues widened to 463 basis points from the previous week’s 458 bps. It was still wider than the 451 bps recorded on March 2 and again on March 3, its tightest spreads for the year so far, but it was well in from the 513 bps reading seen on the last day of 2014.

Lodging leads the way

Back on a sector-by-sector basis, Advantage Data meanwhile showed the lodging sector as the best performer among the significantly sized groupings, gaining 1.15% on the week.

It was the hoteliers’ second consecutive week as the best-performing major sector, having also been the leader the week before with a 0.56% advance.

And it was the grouping’s third straight week among the Top Five best-performing sectors.

Other sectors showing strength in the latest week included metals mining (up 0.88%), precision instrument manufacturing (up 0.41%), food stores (up 0.40%) and electric and gas utilities (up 0.34%).

It was the second straight week that the grocers have been among the Top Five, having also been there the week before with a 0.44% gain.

Metals mining had meanwhile spent each of the previous two weeks among the Bottom Five worst-performing major sectors, with losses of 0.06% in the May 22 week and 0.38% during the week ended May 15. However, the sector has now been among the best finishers in five weeks out of the last seven, having made the Top Five for four successive weeks before turning downward for a couple of weeks.

Coal extends retreat

On the downside, in what has come to be a familiar story, coal mining posted the worst performance by any of the significantly sized sectors, a 2.12% loss last week.

It was the fifth straight week in which coal had the single worst results of any of those major sectors, including the previous week’s 2.27% downturn, a skid dating back to the week ended May 1.

Coal has now also been the worst large-sized performer in six weeks out of the last seven, having also had that dubious honor during the week ended April 17, when it had dropped by 1.30%.

That losing streak was only interrupted during the week ended April 24, when coal atypically put on a rare – and short-lived – show of strength and led all of the key sectors with a 2.19% return. Then it was back to business as usual.

Coal has now also been among the Bottom Five worst large-sized performers – sometimes the absolute worst, other times not – in eight weeks out of the last nine, and in 11 weeks out of the last 13.

Other sectors ending in the red this past week included oil and natural gas exploration and production (down 0.45%) and the industrial machinery and computer equipment manufacturing sector, along with non-computer electronics manufacturing, both of which were off by 0.23%.

Rounding out the latest week’s Bottom Five list, real estate was unchanged on the week, with neither a gain nor a loss. The previous week, it had been among the Top Five with a 0.33% gain.

In contrast, the energy E&P names were in the Bottom Five for a second straight week, having been there the week before with a 0.33% loss.

YTD: Lodging again on top

On a year-to-date basis, the lodging sector (up 13.29%) was the best cumulative performer for a 13th consecutive week.

Food stores (up 7.17%) were in the runner-up spot for a second consecutive week and for a third week in the last four.

Petroleum refining (up 5.45%) moved up by two positions to third-best on the year, after only being fifth-strongest before that.

Holding companies and other investment offices (up 5.27%) fell one notch to just fourth-best on the year from third before. The sector, though, has now been fourth-best in two weeks out of the last three.

The oil and gas E&P sector (up 5.14%) declined by one slot in the rankings to just fifth place, after having been fourth-best the week before.

Coal continues YTD struggle

On the downside, coal mining remained the worst finisher year to date for a 20th straight week, with a loss of 9.82%. It was the only significantly sized sector finishing in the red on a cumulative basis this week.

Securities and commodities brokers, dealers and exchanges (up 1.07%) fell by one position, to second-worst from just third-worst the week before, but the sector has now been in that slot for six weeks out of the last seven, having been down there for five consecutive weeks at one point.

It traded palaces with transportation equipment manufacturing (up 1.23%), which improved by one notch, relatively speaking, to just third-worst on the year from second-worst the week before. The sector has now been third-worst for three weeks out of the last four.

Industrial machinery and computer equipment manufacturers (up 2.69%) declined one notch to fourth-worst on the year from fifth-worst the week before.

It traded places with wholesale durable goods distributors (up 2.76%), which rose one notch to fifth-worst on the year from fourth-worst. The sector has now been fifth-worst on the year for two weeks out of the last three.

© 2015 Prospect News.
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