Advantage Data: Coal extends upturn, helps key junk market sectors post fifth straight rise

By Paul Deckelman

New York, Feb. 24 – With the newly resurgent coal-mining sector continuing its recent rally, the junk market made it five consecutive weekly upturns in a row last week and nine weekly gains in the last 10 weeks, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News 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 29 of those more substantial sectors closing in the black during the week ended Friday, with only one sector in the red.

That was a continuation and strengthening of the already-formidable pattern seen during the previous week, ended Feb. 13, when 26 of those sectors had posted gains, just two had shown losses and two others were unchanged on the week, showing neither a gain nor a loss.

In the latest week, perennially losing sector coal atypically showed strength for a third consecutive week. With almost all of the sectors ending up, even if only marginally, only lodging posted a loss.

Food stores remained the best year-to-date performer so far for a third straight week, while coal, despite its robust weekly showing, continued as the worst 2015 cumulative performer for a sixth successive week, although its cumulative loss dwindled from a week earlier.

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 third week in a row and for the fourth week in the last five.

They were led by the Merrill Lynch High Yield Master II index, which rose for a fifth consecutive week; Friday marked the index’s 25th consecutive daily gain, a winning streak dating back to Monday, Jan. 19.

On the week, it rose by 0.396% as of Friday’s close, on top of the previous week’s 0.244% gain. It was the sixth 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 so far as of Friday was 2.289%, its high point for the year. At the end of the previous week, it had been up by 1.906%. It had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.048%, its low for the year, versus 6.171% the previous Friday and its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues stood at 463 basis points, its tightest spread for the year so far, versus the previous week’s 481 bps spread as well as the 513 bps reading seen on the last day of 2014.

Coal extends gains

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

Coal was up by 2.25%, leading all of the larger sectors, just as it had done the previous week, ended Feb. 13, when it gained 1.73%, and the week before that, ended Feb. 6, when it had soared by 3.59%, snapping a streak of four straight weeks during which it had been among the worst performers.

At that time, the coal sector also accomplished 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 two weeks before that, ended Jan. 16 and Jan. 23, with losses in those weeks of 5.57% and 0.47%, respectively. All told, before the past three strong weeks, coal had been among the worst performers for 11 consecutive weeks.

Other sectors showing strength in the latest week were oil and gas exploration and production (up 1.16%), primary metals processing (up 0.59%), metals mining (up 0.57%) and food manufacturing (up 0.50%).

It was the second straight week that metals mining finished among the Top Five best-performing significantly sized sectors, and the third straight week there for metals processing; each had been among the elite performers the previous week with returns of 1.32% and 0.53%, respectively.

Food manufacturing, on the other hand, had been among the Bottom Five worst-performing sectors over the previous two weeks, with a 0.17% loss the week before – the worst showing among all of the large-sized sectors – and a meager 0.19% return the week before that.

Lodging lags behind

On the downside, lodging was the only major sector showing a loss this past week, when it was down by 0.41%.

The weekly list of the worst-performing sectors was filled out by groupings showing only feeble positive returns on the week relative to their peers.

These included paper manufacturing (up 0.03%), miscellaneous retailing (up 0.07%), depository financial institutions (up 0.09%) and the printing and publishing, food stores and real estate sectors, each of which gained 0.16% on the week.

None of this past week’s worst-performing sectors had been on that list – or the Top Five best-performers honor roll, for that matter – the week before.

Grocers top sector for year

On a year-to-date basis, with seven weeks in the books, the food stores sector (up 5.27%) was the top-performing major sector for a third consecutive week, after having been the runner-up over the prior two weeks.

Despite its week’s worst performance, as noted, lodging (up 4.23%) stayed in the Number-Two slot, also for a third straight week, after having been in the top spot for three weeks before that.

Metals mining (up 3.83%) improved to third-best on the year, despite having not been among the best year-to-date performers the week before.

That pushed electric and gas utilities (up 3.30%) down one notch in the standings to fourth place from third the week before; it’s a familiar position for the utilities, which have been fourth-best on the year now for three weeks out of the past four.

Holding companies and other investment offices (up 3.02%) were fifth-best on the year, despite having not been among the leaders the week before.

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 sixth straight week, although its cumulative loss did shrink to 0.81%.

The other worst-performing year-to-date sectors all retained their positions, relative to one another, for a second consecutive week.

These included wholesale durable goods distributors (down 0.56%) which were second-worst on the year; third-worst transportation equipment manufacturing (up 0.34%); fourth-worst building construction (up 1.05%); and fifth-worst food manufacturing (up 1.23%).

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.