Advantage Data: Junk sectors rebound after prior week’s loss, are up in eight of past 10 weeks

By Paul Deckelman

New York, July 3 – The junk bond market closed out the first half of 2017 on a positive note last week, ended June 30, as it bounced back from a rare loss seen the week before that, ended June 23, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Last week marked the sectors’ eighth positive week out of the last 10 weeks, dating back to the week ended April 28, versus just two down weeks during that stretch – the June 23 week and the week ended May 12. The sectors had mostly risen over the five straight weeks before the June 23 week and over the six weeks in a row before their loss in the May 12 week.

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 five 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 23 of those sectors ending in the black last week, with 10 sectors finishing in the red.

That was an exact mirror image of the breakdown seen during the June 23 week, when 23 of those sectors had suffered losses and 10 had posted gains.

Among specific large-sized sectors during the June 30 week, automotive services was the top performer, while precision instrument manufacturing had the biggest loss.

On a year-to-date basis, with 26 weeks of 2017 now in the books, lodging repeated as the best cumulative performer for a second straight week, while energy exploration and production did the worst for the year to date.

Auto services drive higher

Among the specific large-sized sectors, automotive services, as noted, consisting largely of vehicle-rental companies, was the top finisher among the sectors last week, gaining 2.11%. Traders noted gains in Hertz Corp. and Avis Budget Group, Inc. paper 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. Automotive services had also been the top-finishing sector during the week ended June 16, when it rose by 1.10%.

Other sizable sectors showing strength last week included energy exploration and production (up 1.36%), oil and natural gas extraction (up 1.29%), oilfield services (up 1.01%) and food stores (up 0.54%).

Last week marked an unusual show of strength for each of those other sectors, which had recently been getting beaten up.

The rebound was particularly notable for the three energy-related sectors, which surged ahead last week tin line with a more than week-long upturn in world crude oil prices.

Both energy E&P and oil and gas extraction had spent each of the previous five weeks mired in the Bottom Five grouping of the worst-performing large-sized sectors, including during the June 23 week, when they were down by 2.50% and 2.66%, respectively; oil and gas extraction, had, in fact, been the single worst-performing large-sized sector that week.

Oilfield services had been among the Bottom Five for the previous four straight weeks, with a 1.48% loss during the June 23 week.

Food stores were also finally breaking into the Top Five best-performing major sectors after two consecutive weeks before that among the Bottom Five, including the June 23 week, when the grocers had lost 2.13%.

Precision instruments punished

With all of those energy-related sectors showing strength last week, other sectors filled their recently vacated places among the Bottom Five.

Precision instrument manufacturing had the biggest loss on the week, ending down 0.23%.

Other sectors showing notable weakness included transportation equipment manufacturing (down 0.22%), wholesale durable goods distributors (down 0.21%), primary metals processing (down 0.19%) and coal mining (down 0.13%).

It was the second week in a row the coal miners had ended among the Bottom Five, having also been there during the June 23 week with a 1.08% loss.

Lodging tops for the year

On a year-to-date basis, the lodging sector (up 10.92%) held onto the top spot for a second consecutive week last week. The week before, ended June 23, it had regained the leadership role it had held earlier in the spring, switching places with healthcare, which had held the top spot for the three previous weeks ended June 2, June 9 and June 16, with lodging relegated to the runner-up role during that time.

Before that, lodging had been the cumulative leader and healthcare just No. 2 over three successive weeks ended May 12, May 19 and May 26.

Healthcare meantime was the second-strongest cumulative performer for a second straight week last week, returning 8.94%.

Those top two finishers were followed by third-best chemical manufacturing (up 8.20%), which also occupied that slot for a second week in a row, then by twin fourth-place finishers building construction and depository financial institutions, both of which were up by 6.67% last week.

Energy sectors lag year-to-date

On the downside, energy exploration and production and oil and gas extraction – despite their strong performances on the week, as noted – remained at the bottom of the year-to-date rankings, reflecting the big losses the two sectors had racked up over the previous five weeks.

Energy E& P made the worst cumulative showing (down 0.83%), while oil and gas extraction (down 0.70%) was second-worst.

The two sectors thus reversed the positions they had held during the June 23 week, when oil and gas extraction had been the worst cumulative performer for a second straight week and energy E&P had only been second-worst.

They were followed last week by third-worst miscellaneous retailing (up 1.15%), holding that position for a second straight week; fourth-worst food stores (up 2.40%), and fifth-worst automotive services (up 2.61%) – also despite that sector’s show of strength that week.

© 2015 Prospect News.
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