Advantage Data: Junk sectors show first upturn for year, breaking three-week skid

By Paul Deckelman

New York, Feb. 1 – The junk bond market moved into positive territory for the first time this year last week, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That broke a losing streak which had seen the sectors on the downside for the previous three consecutive weeks, dating back to the start of the year, and in six weeks out of the prior seven.

On a slightly longer-term basis, it was only the third week in the last 10, dating back to the week ended Nov. 27, in which more sectors had posted gains than losses, versus seven weeks of having shown more losing sectors than gainers. The other two positive weeks during that long stretch were the week ended Dec. 31 and before that, the week ended Dec. 4.

Junkbondland, generally speaking, has been choppy ever since the end of a long upward surge in early May; after that, the market mostly experienced periods of several weeks of gains alternating with a couple of weeks of losses, although the market had turned decidedly more negative in recent weeks, as indicated.

A subset of the 33 most significantly sized sectors (out of the total of 60 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 24 of those sectors having finished in the black during the week ended Friday, with nine sectors closing in the red.

That was a clear turnaround from the week before, ended Jan. 22, when 27 of those larger sectors had posted losses for the week, with just six of the sectors registering gains.

Among the specific large-sized sectors, midstream energy companies had the largest gain on the week, while coal mining suffered the biggest loss among the sectors for a third straight week.

On a year-to-date basis, with four weeks in the books for the year so far, coal had the worst showing, with miscellaneous retailing on top for a second week in a row.

Mind stream energy moves up

Among specific large-sized sectors, midstream energy – including companies that process, transport and store oil and natural gas – had the best return of any large-sized sector on the week, firming by 2.33%. It had not been among either the big gainers or the big losers the week before.

Other sectors showing strength last week included primary metals processing (up 1.97%), metals mining (up 1.87%), electric and gas utilities (up 1.82%) and health care (up 0.98%).

It was the second consecutive week among the Top Five best-performing large-sized sectors for both primary metals processing and health care, which had also been there during the Jan. 22 week with gains of 0.21% and 0.98%, respectively.

Like midstream energy, the metals mining and utility sectors had not been among either the big gainers or losers the week before.

Coal stays on the bottom

On the downside, coal mining (down 13.86%) was the week’s single biggest loser for a third straight week and for the fourth time in the last five weeks; its losses of 9.61% and 14.54% had been the worst in the Jan. 22 week and the week ended Jan. 15, respectively, and it had also been the cellar-dweller during the Dec. 31 week, when it had lost 2.64%.

Last week was coal’s 15th week out of the last 16 as part of the Bottom Five worst-performing large-sized sectors, a losing streak interrupted only by a positive performance during the week ended last Nov. 6.

Also posting big losses during the latest week were energy exploration and production (down 1.61%), oil and natural gas extraction (down 1.30%), food stores (down 0.96%) and oilfield services (down 0.93%).

It was the second straight week among the Bottom Five for the grocers, which had also been there the previous week with a 2.75% loss.

It was the third successive week there for oilfield services, which had lost 2.44% in the Jan. 22 week, and the fourth week in a row there for both oil and gas extraction and energy E&P, which posted previous-week losses of 3.30% and 2.53%, respectively.

Oil and gas extraction and energy E&P have also now been among the biggest losers in 11 weeks out of the last 12, with only the Dec. 31 week as the lone exception during that time.

Miscellaneous retailers tops

After four trading weeks so far in 2016, miscellaneous retailing (up 1.76%) is the best-performing large-sized sector on a cumulative basis, its second consecutive week in the top spot.

Unlike the Jan. 22 week, during which the retailers had been the only significantly sized sector in the black for the year so far, several other of those key sectors are now also on the positive side of the ledger for the year to date.

Lodging (up 0.90%) moved up one notch in the standings to the runner-up spot, after having spent the previous three straight weeks as third-best; in 2015, lodging had been the single-best finisher on the year, gaining 18.92%, on the strength of having held that exalted position over the last three weeks of the year and before that, in 43 out of the last 44 weeks of 2015.

Health care (up 0.74%) pushed up to the vacated Number-Three spot, even though it had not been among the year’s better performers so far the week before.

Depository financial institutions (up 0.54%) fell by two positions in the rankings, to just fourth-best on the year after having been in second place the week before and having been the best finisher – with the smallest loss for the year – in the Jan. 15 week.

None of last week’s year-to-date leaders were also among the week’s best-finishing sectors.

Coal mining worst on the year

On the downside, coal mining (down 28.64%) finally resumed its usual position as the worst-performing major sector on a year-to-date basis.

It had started out the new year during the week ended Jan. 8 as only second-worst on the year, then improved, relatively speaking, to just third-worst in the Jan. 15 week and fifth-worst in the Jan. 22 week.

But before that, coal had ended 2015 as the absolute worst for the year, with a 35.31% loss, having been down at the bottom of the mineshaft for 51 straight weeks last year. Coal had also been the single-worst large-sized performer in 2012, 2013 and 2014 as well.

Oil and gas extraction (down 16.24%) was second-worst on the year for a third consecutive week; before it fell one notch in the rankings during the Jan. 15 week, it had been third-worst for the previous 14 straight weeks.

With coal’s severe slide, energy exploration and production (down 15.69%) improved, relatively speaking, moving up two notches in the standings to only third-worst on the year after having spent the two weeks before that as the absolute worst cumulative performer.

Oilfield services (down 9.71%) thus improved by one slot, to just fourth-worst on the year from third-worst the week before.

Food stores (down 6.29%) fell to fifth-worst on the year so far, despite having not been among the worst laggards the week before.

All of the worst year-to-date performers had also been among the week’s worst finishers, as noted.

© 2015 Prospect News.
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