Advantage Data: Refiners’ rally helps key junk market sectors post sixth straight rise

By Paul Deckelman

New York, March 2 – Helped by an upturn in the petroleum refining sector, the junk market made it six consecutive weekly upturns in a row last week and 10 weekly gains in the last 11 weeks, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Monday 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, against seven weekly gains.

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 28 of those more substantial sectors closing in the black during the week ended Friday, with only two sectors in the red.

That was a continuation and strengthening of the already-formidable pattern seen during the previous week, ended Feb. 20, when 29 of those sectors had posted gains and just one showed a loss.

In the latest week, petroleum refining was the top finisher, with perennially losing sector coal – which had been the leader in each of the previous three weeks – continuing its recent atypical show of strength as well.

With almost all of the sectors ending up, even if only marginally, only chemical manufacturing and the securities and commodities brokers, dealers and exchanges sector posted a loss.

Food stores remained the best year-to-date performer so far for a fourth straight week, while coal, despite another robust weekly showing, continued as the worst 2015 cumulative performer for a seventh successive week, although its cumulative return for the year moved back into the black after weeks of red ink.

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 fourth week in a row and for the fifth week in the last six.

They were led by the Merrill Lynch High Yield Master II index, which rose for a sixth consecutive week; Friday marked the index’s 30th consecutive daily gain, a winning streak dating back to Monday, Jan. 19.

On the week, it rose by 0.73% as of Friday’s close, on top of the previous week’s 0.396% gain. It was the seventh 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 3.036%, its high point for the year and first time above the 3% mark since Dec. 5, 2014, when it had stood at 3.005%. At the end of the previous week, it had been up by 2.289%.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 5.843%, its low for the year, versus 6.048% the previous Friday and its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues stood at 455 basis points, its tightest spread for the year so far, versus the previous week’s 463 bps spread as well as the 513 bps reading seen on the last day of 2014.

Refiners rise to the top

Back on a sector-by-sector basis, Advantage Data meanwhile showed the petroleum refining sector posting the best gain of any of the large-sized sectors, as it rose by 1.73% on the week.

That was followed by coal mining (up 1.46%), as the volatile sector exhibited rare strength for a fourth successive week, after a long stretch when it had been among the worst performers.

That followed three straight weeks during which coal had actually, and atypically, been the best-performing major sector, with gains of 1.16% during the week ended Feb. 20 and 1.73% during the week ended Feb. 13.

During the week ended Feb. 6, coal had soared by 3.59%, snapping a streak of four straight weeks during which it had been among the worst performers. At that time, it 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 four strong weeks, coal had been among the worst performers for 11 consecutive weeks.

Other sectors showing strength in the latest week were wholesale durable goods distributors (up 1.17%), electric and gas utilities (up 1.01%) and printing and publishing (up an even 1.00%). The printers, meanwhile, had been among the worst finishers the week before, with a feeble 0.16% return.

Chemicals do the worst

On the downside, chemical manufacturing (down 0.09%) and security and commodities brokers, dealers and exchanges (down 0.04%) were the only major sector showing losses this past week.

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

These included metals mining (up 0.10%), holding companies and other investment offices (0.34%) and automotive services up 0.36%).

It was a severe reversal for the metals miners, which had been among the Top Five better performers over the previous two weeks, with gains of 0.57% in the Feb. 20 week and 1.32% in the Feb. 13 week.

Grocers year’s top sector

On a year-to-date basis, with eight weeks in the books, the food stores sector (up 5.92%) was the top-performing major sector for a fourth consecutive week, after having been the runner-up for two weeks before that.

Lodging (up 4.91%) stayed in the Number-Two slot, also for a fourth straight week, after having been in the top spot for three weeks before that.

Electric and gas utilities (up 4.38%), one of the week’s top finishers, as noted, moved up one notch into third-best, for the second week in the last three. During the previous week, it had been the fourth-strongest, a position it held for three weeks out of the past four.

Petroleum refining, which led all of the key sectors this past week, as noted, leveraged that big gain to also move into fourth-best on the year with a 4.17% return, despite having not been among the best year-to-date performers the week before.

Oil and natural gas exploration and production (up 3.65%) improved to fifth-best on the year, despite having also not been among the previous week’s leaders.

On the downside, despite coal mining’s continued strong weekly performance, as noted, the grouping remains the worst-performing year-to-date major sector for a seventh straight week, although its modest year-to-date return of 0.71% was back in the black, versus the 0.81% year-to-date loss it had shown the week before.

Transportation equipment manufacturing (up 0.73%) fell by one position to second-worst on the year, after having been just third-worst over the prior two weeks.

Holding companies and other offices (up 0.93%), one of the week’s weaker finishers, as noted, fell to third-worst on the year, despite having not been among the cumulative underachievers the week before.

Food manufacturing (up 1.41%) lost one notch in the standings, falling to fourth-worst after having been only fifth-worst the two previous weeks.

Wholesale durable goods distributors – on the strength of its solid weekly showing, as noted – improved by three notches, to just fifth-worst on the year with a 1.52% return, after having been second-worst over the previous two weeks.

© 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.