Advantage Data: Food makers firm as junk market edges up for second week; coal mining sector slides

By Paul Deckelman

New York, June 30 – The junk bond market stayed in positive territory – though narrowly – for a second straight week after two consecutive weeks before that on the downside, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News by Advantage Data Inc.

Showing high yield’s recently streaky nature, that now-ended two-week slump had followed a three-week upturn, which had come after a two-week skid. That setback, in turn, had halted a six-week winning streak dating back to mid-March.

With 25 weeks now in the books so far this year, last week’s narrow gain marked 18 weeks on the upside recorded this year, versus seven weekly retreats.

A subset of the 30 most significantly sized sectors (out of the total of 59 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 15 of those more sizable sectors closing in the black during the week ended Friday, with 14 sectors ending in the red and one sector unchanged, showing neither a gain nor a loss on the week.

That breakdown was almost identical to that recorded the week before, ended June 19, when 16 sectors had posted gains and 14 showed losses.

Among specific sectors, food manufacturing had the best weekly showing among those major sectors.

On the downside, the volatile coal mining sector – which had shown atypical strength in the week ended June 19 as it went from worst-to-first by posting the best showing of any large sector after seven consecutive weeks at the absolute bottom of the mineshaft – returned to form last week, going from first to worst and ending with the biggest sector loss.

Not surprisingly, coal remained the worst year-to-date finisher among the big sectors for a 24th successive week, while the lodging sector remained on top year to date for a 17th week in a row.

Index heads south

Other statistical indicators of general junk market performance ended mixed last week versus where they had finished out the previous Friday for a second consecutive week, after having been lower across the board for two straight weeks before that and in three weeks out of the previous four, a slide interrupted only by the upturn all around during the week ended May 29.

However, the Merrill Lynch High Yield Master II index lost ground last week after having finished higher the previous week; it has now been on the downside in three weeks out of the last four, and in four weeks out of the last six.

The index fell by 0.248% on the week, after having risen by 0.062% the week before.

The latest loss cut its year-to-date return to 2.901% as of Friday, down from 3.157% the week before. Those levels, in turn, remained below the 4.062% at which it had ended on May 29, 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 6.37% from 6.297% 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 2015 peak of 6.86%, reached on Jan. 6, and its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues narrowed to 475 basis points from the previous week’s 482 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 still well in from the 550 bps seen on Jan. 5, the widest 2015 reading, as well as the 513 bps seen on the last day of 2014.

Food makers top gainers

Back on a sector-by-sector basis, Advantage Data meanwhile showed the food manufacturing sector with the best performance for the week of any of the significantly sized sectors, as it rose by 0.39%.

Other sectors showing strength in the latest week included petroleum refining (up 0.34%), the health care and lodging sectors (both up 0.29%) and non-computer electronics manufacturing (up 0.16%).

Petroleum refining was among the previous week’s worst performers, showing a 0.20% loss in the week ended June 19, but that was an anomaly – the refiners have now been among the Top Five strongest sectors in two weeks out of the last three.

Coal back on the bottom

On the downside, the coal mining sector was back on familiar ground, buried at the absolute bottom after a rare week in which it had outperformed everyone else.

In the latest week, coal lost 3.53%, much worse than any other large-sized sector, in contrast to the week before, when its 0.83% gain was the best among the large sectors – and that unusual show of strength had followed seven straight weeks during which it had been the absolute worst finisher, culminating with a 5.99% plunge for the week ended June 12.

The volatile sector thus went from worst to first in the week ended June 19, only to reverse that last week and travel from first to worst.

It has been the absolute worst finisher now in eight weeks out of the last nine and in nine weeks out of the last 11, as well as having been among the Bottom Five worst-performing large sectors for a given week – sometimes the absolute worst, other times not – in 11 weeks out of the last 13, and in 14 weeks out of the prior 17.

Other sectors showing weakness included oil and natural gas exploration and production (down 0.58%), paper manufacturing (down 0.37%), miscellaneous retailing (down 0.29%) and metals mining (down 0.22%).

It was the second consecutive week among the Bottom Five for both the energy E&P grouping and the papermakers, having each been there during the June 19 week with losses of 0.57% and 0.33%, respectively.

Lodging stays on top for year

On a year-to-date basis, the lodging sector (up 16.09%) was the best cumulative performer for a 17th consecutive week.

The food stores grouping (up 8.66%) was in the runner-up spot for a sixth consecutive week and for a seventh week in the last eight.

Holding companies and other investment offices (up 5.36%) were third-best on the year so far for a third week in a row.

Petroleum refining – one of the week’s better performers, as noted – improved to fourth-strongest year to date with a 4.85% return, despite having not been among the cumulative leaders the week before.

The same was true of primary metals processing (up 4.31%), which moved up to fifth-best on the year after having not been among the previous week’s year-to-date leaders either.

Coal in deeper YTD hole

On the downside, coal mining – clearly the week’s worst performer, as noted – continued to do ever-worse on a year-to-date basis as well, showing a 2015 loss so far of 16.25%. It was coal’s 24th straight week at the bottom of the pile.

However, 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.

The securities and commodities brokers, dealers and exchanges sector (up 0.28%) was the second-worst performer so far this year for a second straight week and for a ninth week out of the previous 11.

Transportation equipment manufacturing (up 0.90%) was the third-worst major sector on the year for a second straight week, as well as in four weeks out of the last five and in six weeks out of the last eight.

Paper manufacturing (up 1.70%) was fourth-worst on the year for a second week in a row and has also been fourth-worst in three weeks out of the last four.

Real estate (up 2.14%) tumbled to fifth-worst on the year, despite having not been among the worst laggards the week before.

© 2015 Prospect News.
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