Advantage Data: Junk sectors fall for second time in last three weeks

By Paul Deckelman

New York, July 10 – The junk bond market turned negative to open the second half of 2017 last week, ended July 7, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc., deteriorating from the gains seen the week before, ended June 30.

It was the second such down week seen in the last three, with the sectors having also been in retreat during the week ended June 23, which had snapped a five-week winning streak.

Last week marked just the third negative week for the sectors out of the last 10 weeks, dating back to the week ended May 5, versus seven positive weeks during that stretch. Besides last week and the June 23 week, there were also more losing sectors than gainers during the week ended May 12, which had snapped a six-week upside run.

For the year to date, a majority of the sectors have finished on the plus side in 21 weeks so far, while negative results have dominated in six weeks to date.

A subset consisting of the 33 largest sectors (out of the total of 61 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 27 of those sectors ending in the red last week, with just five sectors finishing in the black and one sector – coal mining – ending unchanged on the week, showing neither a gain nor a loss.

That stood in stark contrast versus the breakdown seen during the June 30 week, when 23 of those sectors had posted gains while 10 had suffered losses – the exact mirror image of the results for the June 23 week, which saw 23 losers and 10 gainers.

Among specific large-sized sectors during the July 7 week, automotive services repeated as the top performer, while oil and natural gas extraction had the biggest loss.

On a year-to-date basis, with 27 weeks of 2017 now in the books, lodging held sway as the best cumulative performer for a third straight week, while weekly loser oil and natural gas extraction also did the worst for the year to date.

Energy names underperform

A trio of energy-related sectors – which had put on a rare show of strength during the June 30 week, in response to an upside blip in world crude oil prices – last week returned to their more usual position as having been among the worst performers, as the crude rally abruptly ended and oil prices began to fall once more.

Oil and gas extraction (down 0.67%) had the worst loss among the key sectors for the week, as noted, followed by energy exploration and production (down 0.48%) and oilfield services (down 0.40%).

All three had been among the Top Five best-performing large-sized sectors during the June 30 week, with gains of 1.29%, 1.36% and 1.01% that week, respectively.

However, oil and gas extraction and energy E&P had both been among the Bottom Five worst-performing sectors for five straight weeks before that, most recently during the week ended June 23, when they had losses of 2.66% for oil and gas extraction – the biggest loss of any sector that week – and 2.50% for E&P; both thus ended among the Bottom Five last week for the sixth week out of the last seven.

Oilfield services, before its upturn in the June 30 week, had been among the Bottom Five over four consecutive weeks before that, including a 1.48% deficit in the June 23 week; it was thus among the worst underachievers last week for the fifth time in the last six weeks.

Other sectors showing notable weakness last week included chemical manufacturing (down 0.32%) and telecommunications (down 0.29%); neither had been among the big winners or losers in the June 30 week, but both had been among the Top Five during the June 23 week with gains of 0.66% and 0.05%, respectively.

Auto services parked on top

On the upside – such as it was last week, with most sectors solidly negative – automotive services, as noted, consisting largely of vehicle-rental companies, was the top finisher among the large-sized sectors for a second consecutive week, managing a 0.13% upturn, following a 2.11% surge during the June 30 week.

Traders said that sector continued to ride the positive momentum generated the previous week when Hertz Corp. and Avis Budget Group, Inc. paper had posted gains amid news that the two car rental giants were working with, respectively, Apple and an affiliate of Google, on those tech companies’ efforts to develop self-driving cars.

It was the third week out of the last four during which automotive services had been the top-finishing sector of all, having also driven higher during the week ended June 16 with a 1.10% gain.

Other sizable sectors managing to avoid a loss last week included building construction (up 0.11%), food stores and real estate (both up 0.04% on the week) and non-computer electrical and electronics manufacturing (up 0.01%).

It was the second week in a row among the Top Five for food stores, with the grocers having also been there during the June 30 week, with a 0.54% gain, though before that, the sectors had been among the Bottom Five worst finishers for two weeks in a row.

Reals estate made the Top Five for a second week out of the last three, having also been among the elite finishers during the June 23 week, when it edged up by 0.05%.

Lodging tops for the year

On a year-to-date basis, the lodging sector (up 8.26%) held onto the top spot for a third consecutive week last week, followed by health care (up 8.19%) and chemical manufacturing (up 7.39%), both of which were also steady in the runner-up and third-best slots for a third straight week.

Lodging had shot to the top of the rankings during the week ended June 23, reversing places with health care, which had been in the top spot, with lodging only second-best, over the prior three straight weeks.

And before that, lodging had been the cumulative leader and health care just Number-Two over the three successive weeks ended May 12, May 19 and May 26.

Building construction (up 6.62%) was fourth-strongest for a second straight week, followed by depository financial institutions (up 6.60%), which slipped to fifth-best after having tied the construction sector for fourth-best cumulative return in the June 30 week. The financials had also been fifth-best on the year in the June 23 week.

Energy sectors lag

On the downside, oil and gas extraction and energy exploration and production – having come down from their surge during the June 30 week and settled back in last week among the worst weekly performers, as noted, solidified their positions at the bottom of the year-to-date rankings.

Oil and gas extraction (down 1.61%) fell to the absolute bottom of the pile last week after having only been second-worst on the year the week before; the sector has now been the worst major sector for the year in three weeks out of the last four.

Energy E&P (down 0.70%), improved relatively speaking last week to just second-worst on the year, after having been the absolute worst finisher in the June 30 week; it has now been second-worst in two weeks out of the last three.

Away from the energy sphere, miscellaneous retailing (up a meager 0.06% on the year) was third-worst on the year for a third week in a row.

Non-computer electronics manufacturing (up 0.88%) fell to fourth-worst, after not having been among the laggards the week before.

Food stores (up 0.97%) improved to just fifth-worst from fourth-worst the week before that; the grocers have now been fifth worst on the year in three weeks out of the last four.

© 2015 Prospect News.
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