Advantage Data: Lodging, real estate lead junk sectors mostly lower; coal, chemicals among gainers

By Paul Deckelman

New York, Oct. 5 - After a five-week upside surge, high-yield industry sectors turned mostly lower in the week ended Friday, with the relatively few upsiders largely confined to small gains, at best, while a number of the declining sectors posted sizable losses, according to statistics supplied to Prospect News by Advantage Data Inc.

Besides being the first down week in more than a month, the latest week was only the second such losing week out of the last 12.

In the latest week, among the more significantly sized broad-industry sectors - as measured by the number of issuers, the collective number of issues and the total face amount of bonds tracked - lodging was the biggest loser, a clear reversal of its very strong showing the week before, with real estate also showing a nosedive into the red. The amusement services sector was yet another big loser.

On the other hand, few of the junk sectors overall, and only a handful of the major ones, showed any kind of notable gains, with coal mining, and chemical and paper manufacturing producing modest advances, at best.

Of the 70 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, 39 showed negative returns in the week ended Friday, while 31 had positive returns - a significant reversal from the previous week's breakdown of 67 sectors in the black and only three in the red, just two of them major groupings.

On a statistical basis, the junk market continued to show a very strong year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, although that return came down a little from the 2009 peak level of above 48%.

Lodging the leading loser

The lodging sector went from first to worst among all of the significantly sized sectors, posting a 2.66% loss on the week - in sharp contrast to the 2.95% gain seen in the previous week, ended Sept. 25, which had been the best of any major sector.

Another sharp reversal came in real estate, which fell 2.54% in the latest week, versus its solid 1.46% gain the previous week, when it was among the better-performing large sectors for a fifth consecutive week. Amusement services, however, with a 1.98% decline, continued to show weakness - its 0.51% retreat the previous week was the worst of any of the 70 industry groupings, significant or otherwise. Petroleum refining (down 1.15%) also saw a loss greater than 1%.

Coal mining moves up

On the upside, coal mining had an 0.80% gain on the week, the best of any significant sector, and a solid comeback from the week before, when its 0.09% loss was, along with amusements, the only two losses among the 30 significantly sized sectors.

Chemical manufacturing (up 0.44%) and paper manufacturing (up 0.31%) were the only other large sectors showing gains of more than a few hundredths of a percentage point. Both had also been among the solid gainers the week before, posting respective returns of 1.82% and 1.02% that week.

Real estate leads on year

Advantage Data reported that among the significantly sized sectors, real estate - despite its sharp loss on the week - continued to lead on the year, up 158.02%, while financial brokerages and exchanges had a 102.85% cumulative gain. Electronics manufacturing showed a 77.15% return, while automotive services - mostly vehicle rentals - returned 61.79% on the year.

On the downside, no significantly sized sectors were in the red year to date. Depositary financial institutions showed a 16.03% return, the weakest major sector, followed by wholesale durable goods, (up 16.60%).

Key market indicator backs off

Looking at the overall domestic high-yield market, junk, as measured by the Merrill Lynch High Yield Master II Index, suffered a 0.519% one-week loss as of Friday, cutting its year-to-date return to 47.706% - still formidable - from 48.475%, its peak for the year, at the end of the previous week.

The average price of a high-yield issue covered by the Master II stood at 90.375 at Friday's close, with a spread to worst of 810 basis points over comparable Treasuries and a yield to worst of 10.36% - versus a price of 90.584, a spread of 785 bps and a yield of 10.15% the week before.

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