Advantage Data: Coal continues upturn, helps key junk market sectors extend rise

By Paul Deckelman

New York, Feb. 17 – Aided by a suddenly resurgent coal-mining sector, the junk market made it four consecutive weekly upturns in a row last week and eight weekly gains in the last nine weeks, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc.

The market thus continued to build on its recently robust momentum, which had been briefly interrupted by a relatively uncommon overall market downturn in the week ended Jan. 16 – its first, and so far only retreat of the year, and the first in five weeks.

And before that solitary retreat, a majority of the junk sectors had moved higher over four more 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 26 of those more substantial sectors closing in the black during the week ended Friday, with only two sectors in the red and two others unchanged on the week, showing neither a gain nor a loss.

That was a continuation of the strong pattern seen during the previous week, ended Feb. 6, when 28 of those sectors had posted gains and just two had shown losses.

In the latest week, recent losing sector coal atypically showed strength for a second consecutive week. With most of the sectors ending up, only food manufacturing and transportation equipment manufacturing posted losses.

Food stores remained the best year-to-date performer so far for a second week, while coal, despite its robust weekly showing, continued as the worst 2015 cumulative performer for a fifth successive week.

Index continues improvement

Other statistical indicators of general market performance, meanwhile, were higher across the board last week versus where they had finished out the previous week for a second week in a row and for the third week in the last four.

They were led by the Merrill Lynch High Yield Master II index, which rose for a fourth consecutive week; Friday marked the index’s 20th consecutive daily gain.

On the week, it rose by 0.244% as of Friday’s close, on top of the previous week’s 0.964% jump. It was the fifth weekly gain of the year so far against just one weekly loss – the 0.297% setback suffered during the week ended Jan. 16, which had snapped a winning streak of four consecutive upside weeks before that, dating back to mid-December.

The index’s year-to-date return for the new year so far as of Friday was 1.906%, its high point for the year. At the end of the previous week, it had been up by 1.659%.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.171%, its low for the year, versus 6.198% the previous Friday and its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues stood at 481 basis points, its tightest spread for the year so far, versus the previous week’s 487 bps spread as well as the 513 bps reading seen on the last day of 2014.

Coal continues climb

Back on a sector-by-sector basis, Advantage Data meanwhile showed the volatile coal mining sector exhibiting rare strength for a second successive week, after a long stretch when it had been among the worst performers.

Coal was up by 1.73% last week, leading all of the larger sectors, just as it had done the previous week, when it had soared by 3.59%, snapping a streak of four straight weeks during which it had been among the worst performers and accomplishing the uncommon feat of having gone from worst to first; in the week ended Jan. 30, it had been the absolute worst major sector with a 1.48% loss. It had also been the cellar-dweller the previous two weeks, ended Jan. 16 and Jan. 23, with losses in those weeks of 5.57% and 0.47%, respectively.

All told, before the past two strong weeks, coal had been among the worst performers for 11 consecutive weeks.

Other sectors showing strength in the latest week were metals mining (up 1.32%), petroleum refining (up 0.88%), holding companies and other investment offices (up 0.58%) and the building construction and primary metals processing sectors, both of which rose by 0.53% on the week.

It was the second straight week among the best performers for the refiners and the metals manufacturers, which had also been among the Top Five the week before with returns of 1.41% and 1.45%, respectively.

The holding companies sector, on the other hand, had been among the worst performers in each of the previous three weeks, including the Feb. 6 week, when it had achieved a meager 0.14% return.

Food manufacturers falter

On the downside, food manufacturing (down 0.17%) was the single worst performer of any large sector. It was the grouping’s second straight finish among the worst performers, having also been there the week before with a feeble 0.19% gain.

Transportation equipment manufacturing (down 0.05%) was the only other major sector showing a loss on the week.

The Bottom Five list of the worst-performing sectors was filled out by two sectors that were unchanged on the week, showing neither a gain nor a loss – electric and gas utilities and non-depository credit institutions – as well as insurance carriers, which returned an anemic 0.03% on the week. It was the insurers’ second straight week among the underachievers, having also been there the previous week with a 0.10% loss.

Food stores year’s best

On a year-to-date basis, with six weeks in the books, the food stores sector (up 5.16%) was the top-performing major sector for a second consecutive week, after having been the runner-up over the prior two weeks.

Lodging (up 4.87%) stayed in the Number-Two slot, also for a second straight week, after having been in the top spot for three weeks before that.

Electric and gas utilities (up 3.09%), despite their unchanged weekly performance, as noted, still managed to move up by one position into third place on the year so far, after having been fourth-best for two straight weeks.

That, in turn, allowed telecommunications (up 2.66%) to also improve by one notch, to fourth-best, after having been fifth-best for the prior two weeks.

Paper manufacturing (up 2.62%), which had been third-strongest over the previous three weeks, tumbled by two positions to just fifth-best in the latest week.

On the downside, despite coal mining’s strong weekly performance, as noted, the grouping remains the worst-performing year-to-date major sector for a fifth straight week, although its cumulative loss did shrink to 2.55%.

Wholesale durable goods distributors (down 0.67%) slipped two notches in the rankings to second-worst on the year from fourth-worst the week before.

Transportation equipment manufacturing (up 0.23%), also fell by two positions, to third-worst on the year from just fifth-worst the week before.

That helped building construction gain one position, relatively speaking, improving to just fourth-worst from third-worst the week before.

Food manufacturing – the week’s worst performer, as noted – fell to fifth-worst year to date, despite having not been among the worst cumulative performers the previous week.

© 2015 Prospect News.
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