Advantage Data: Coal collapse continues as market turns lower; food stores escape carnage

By Paul Deckelman

New York, June 8 – The junk bond market snapped a three-week winning streak and moved decidedly lower last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That now-ended three-week upturn had followed a two-week skid, which in turn had halted a six-week winning streak dating back to mid-March.

With 22 weeks now in the books so far this year, last week’s fall was just the sixth weekly retreat recorded so far this year, versus 16 weeks on the upside.

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 fully 28 of those more sizable sectors closing in the red during the week ended Friday, with only two sectors ending in the black.

That was a sharp reversal from the trend seen the week before, ended May 29, when 25 sectors had shown gains, four had suffered losses and one sector was unchanged on the week, showing neither a gain nor a loss.

Coal mining had the biggest loss among any of the significantly sized sectors for a sixth straight week and not surprisingly remained the worst year-to-date finisher among the big sectors for a 21st successive week.

Food stores was one of the few large-sized sectors not finishing in the red for the week. The lodging sector remained on top year to date for a 14th week in a row.

Index in retreat

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

That was a change from the May 29 week, when they had been higher all around.

The latest week was the second week in the last three and third week in the last six during which the indicators were 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 better the week before, the Merrill Lynch High Yield Master II index ended lower last week for its second negative week in the last three.

The index fell by 0.739% on the week, after having gained 0.159% the week before.

That brought its year-to-date return down to 3.293% as of Friday from 4.062% the week before, its peak level for the year so far. The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst had risen to 6.278% from 5.948% the Friday before. While it remained above the 5.843% seen on Feb. 27, its low for the year, the yield was still down from its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues widened to 467 basis points from the previous week’s 463 bps. It was 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.

Coal buried again

Back on a sector-by-sector basis, Advantage Data meanwhile showed the coal sector as the worst performer among the significantly sized groupings, sliding by 4.51% on the week.

It was the sixth straight week in which coal had the single worst results of any of those major sectors, including the previous week’s 2.12% downturn, a skid dating back to the week ended May 1.

Coal has now also been the worst large-sized performer in seven weeks out of the last eight, 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.

Additionally, coal has now been among the Bottom Five worst large-sized performers – sometimes the absolute worst, other times not – in nine weeks out of the last 10, and in 12 weeks out of the last 14.

Other sectors ending solidly in the red this past week included depository financial institutions (down 0.80%), oil and natural gas exploration and production (down 0.79%), paper manufacturing (down 0.73%) and telecommunications (down 0.71%).

It was the energy sector’s third consecutive week in the Bottom Five, having also been there the week before with a 0.45% loss.

Food stores a bit firmer

On the upside, there wasn’t much to celebrate, with just two out of the 30 significantly sized sectors finishing in the black – and even they didn’t make it by very much.

Food stores was the best-performing key sector, with a meek gain of 0.07%.

Still, it was the grocers’ third consecutive week among the Top Five best-performing major sectors. The grouping had also been there the week before with a 0.40% return.

Wholesale durable goods distributors (up 0.04%) was the only other large-sized sector actually posting a weekly gain.

The latest week’s Top Five was thus filled out by a trio of sectors merely posting smaller losses than their peers.

These included precision instrument manufacturing (down 0.10%), securities and commodities brokers, dealer and exchanges (down 0.12%) and printing and publishing (down 0.15%).

The precision-instrument makers, which includes the manufacture of medical devices, were among the top finishers for a second successive week, having also been there the week before with a 0.41% advance.

YTD: Lodging again on top

On a year-to-date basis, the lodging sector (up 12.89%) was the best cumulative performer for a 14th consecutive week.

The food stores grouping (up 8.95%), the week’s best performer, as noted, was in the runner-up spot for a third consecutive week and for a fourth week in the last five.

The oil and gas E&P sector (up 4.90%) moved up by two slots in the rankings to third place, after having been just fifth-best the week before.

Holding companies and other investment offices (up 4.79%) were fourth-best on the year for a second straight week and for a third week out of the last four.

Miscellaneous retailing (up 4.35%) moved up to fifth-strongest on the year so far, despite having not been among the leading sectors the week before.

Coal continues YTD struggle

On the downside, coal mining remained the worst finisher year to-date for a 21st straight week, with a loss of 10.53%. As has been the case for a number of weeks, it was the only significantly sized sector finishing in the red on a cumulative basis.

Securities and commodities brokers, dealers and exchanges (up 0.74%) was the second-worst major sector for a second straight week and for seven weeks out of the last eight, having been down there for five consecutive weeks at one point.

Transportation equipment manufacturing (up 0.94%) was third-worst on the year, also for a second consecutive week, and for four weeks out of the last five.

Paper manufacturing (up 1.86%) fell to fourth-worst on the year so far, despite having not been among the worst underachievers the week before.

Wholesale durable goods distributors (up 2.23%) were fifth-worst on the year for a second consecutive week and for the third week out of the last four.

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