Advantage Data: Mining slides as key junk market sectors snap winning streak; lodging does the best

By Paul Deckelman

New York, Jan. 20 – The junk market lost its recent upside momentum, easing for the first time in five weeks and the first time this year, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc.

Before last week’s downturn, it had moved higher over four consecutive weeks, recovering from an early December two-week losing streak.

A subset of the 30 most significantly sized sectors (out of the total of 58 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 16 of those more substantial sectors closing in the red during the week ended Friday, with 13 sectors in the black and one sector unchanged, showing neither a gain nor a loss on the week.

That was a sharp reversal from the previous week, ended Jan. 9, when 24 of the sectors had shown gains and just six had posted losses – little changed from the week ended Jan. 2, when 23 of the sectors had been on the upside and seven had been on the downside.

In the latest week, the downturn was led by the three significantly sized mining sectors – coal, metals and oil and natural gas extraction. Lodging was the top-performing sector.

For a second consecutive week, year-to-date returns largely reflected the key sectors’ weekly performance.

Index turns lower

Other statistical indicators of general market performance, meanwhile, were lower across the board last week after having been mixed versus where they had finished out the week before for two straight weeks, and before that, having been higher all around for two straight weeks.

The Merrill Lynch High Yield Master II index led the way downward, declining by 0.064% on the week as of Friday’s close.

That snapped an upside streak of four consecutive weeks, including the week ended Jan. 9, during which it had risen by 0.212% on the week.

The index’s year-to-date return for the new year so far as of Friday was down 0.064%, after having been up by 0.234% the week before, its high point so far for the year. It had closed out 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.686%, up from 6.638% the previous Friday and from its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues stood at 547 basis points, wider than the previous Friday’s 529 bps as well as the 513 bps on the last day of 2014.

Mining issues get mauled

Back on a sector-by-sector basis, Advantage Data meanwhile showed the three key mining sectors – coal, metals and oil and natural gas – all suffering big losses for the week.

The worst was coal (down 5.57%), which was followed by metals (down 2.42%) and oil and gas (down 1.43%).

It was coal’s ninth consecutive week among the worst-performing sectors, and its third week in the last four that it was absolutely the worst. It had lost 0.30% in the week ended Jan. 9.

Metals mining, on the other hand, had actually shown rare strength in each of the previous two weeks, leading all of the major-sized sectors both weeks, with returns of 0.91% during the week ended Jan. 9 and 0.39% during the week ended Jan. 2.

But the energy names remained among the worst performers for a third straight week and had been the single worst finisher the week ended Jan. 9, when the grouping lost 0.74%.

Rounding out the latest week’s Bottom Five list were transportation manufacturing (down 1.12%) – though it had actually been among the best finishers the week before, with a 0.54% gain – and the building construction and food manufacturing sectors, both of which lost 0.33% on the week.

Lodging leads the way

On the upside, the lodging sector had the best showing among the larger-sized sectors, returning 1.71%.

It was joined on the latest Top Five list by health care (up 0.52%), paper manufacturing (up 0.47%), electric and gas utilities (up 0.41%) and food stores (up 0.37%).

The papermakers had also been among the elite finishers the week before, with a 0.79% gain that week.

Lodging best, coal worst

As noted, for a second straight week, the year-to-date sector-performance leaders and laggards largely mirrored those on top or on the bottom in the latest week.

On the strength of its stellar showing this past week, lodging (up 1.47%) was also the year-to-date leader, having jumped all the way into the top spot from fifth-best, where it had been the previous week.

Paper manufacturing (up 1.18%) – another one of the weekly big gainers – moved up by one notch in the 2015 cumulative rankings to the runner-up spot, after having been third-best the week before.

They were followed by insurance carriers (up 0.87%) industrial machinery and computer manufacturing (up 0.81%) and electric and gas utilities (up 0.80%). The latter sector was also one of the leaders on the week.

On the downside, coal mining (down 5.25%) tumbled to the absolute bottom on a year-to-date basis, followed by oil and gas (down 2.66%) – the previous week’s year-to-date cellar-dweller – metals mining (down 1.21%), holding companies and other investment offices (down 0.99%) and transportation equipment manufacturing (down 0.59%). All except the holding companies sector were also among the week’s worst finishers, as noted.

© 2015 Prospect News.
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