Advantage Data: Coal collapse drags key junk market sectors lower on week after six straight gains

By Paul Deckelman

New York, March 9 – Hurt by the volatile coal mining sector’s return to the Dark Side after four straight weeks when it atypically had been among the best performers, the overall junk market moved lower last week for the first time after six consecutive weeks of gains, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Last week’s downturn was only the second recorded so far this year, against seven weeks of upside. Before last week, the only losing week had been during the week ended Jan. 16 – and before that had been four more consecutive weeks of improvements, dating back to mid-December of last year.

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 12 sectors in the black and two others unchanged, posting neither a gain nor a loss.

That was a sharp reversal from the week before that, ended Feb. 27, which had seen fully 28 of those larger sectors posting gains on the week, versus only 2 sectors showing losses.

In the latest week, coal was back in the familiar position it had occupied over the first several weeks of the new year, leading all of the losers lower on the week as well as having the worst year-to-date performance for an eighth consecutive week. Its cumulative return was back in the red after having moved briefly into the black the previous week.

On the upside, metals mining was the best finisher on the week, while the lodging sector moved up to the top spot on a year-to-date basis, toppling food stores, which had been the year-to-date leader over the previous four weeks.

Index moves lower

Other statistical indicators of general market performance, meanwhile, were lower across the board last week versus where they had finished out the previous week for the first time after four straight weeks of better returns and five weeks out of the previous six, interrupted by one mixed week.

They were led by the Merrill Lynch High Yield Master II index, which fell for the first time last week after a solid six straight weeks of upside, including 31 consecutive daily gains – a now-ended winning streak that had dated back to Monday, Jan. 19.

On the week, it fell by 0.412% as of Friday’s close, versus the previous week’s 0.73% gain. It was only the second weekly loss of the year so far against seven weekly gains. The sole previous loss had been the 0.297% setback suffered during the week ended Jan. 16, which in turn had snapped a winning streak of four consecutive better weeks before that, dating back to mid-December.

The index’s year-to-date return so far as of Friday was 2.611%, down from 3.036% at the end of the previous week and down from its peak level for the year so far of 3.125%, set last Monday.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.046%, up from 5.843% the previous Friday, its low for the year, although the yield did remain below its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues stood at 454 basis points, slightly tighter than the previous Friday’s 455 bps, although that was a little wider than the 451 bps recorded last Monday and Tuesday, its tightest spread for the year so far. It was also in from the 513 bps reading seen on the last day of 2014.

Coal back in a hole

Back on a sector-by-sector basis, Advantage Data meanwhile showed the coal mining sector posting the worst performance by any of the significantly sized sectors, plunging by 1.83% on the week.

That was in sharp contrast to the robust 1.46% return that the volatile sector had put up the previous week, ended Feb. 27, and it contrasted even more starkly with its performance in the three weeks before that – during the weeks ended Feb. 6, Feb. 13 and Feb. 20, when the miners were the absolute best finishers in each of those weeks, especially Feb. 6, when coal had been red-hot with a sizzling 3.59% weekly return. That, in turn, had snapped a streak of three straight weeks, ended Jan. 16, Jan. 23 and Jan. 30, during which it had been the cellar-dweller among all of the large-sized sectors – part of an 11-week skid, dating back to late November, during which coal had been among the worst-finishing sectors in each of those weeks.

Other sectors showing notable losses last week included non-depository credit institutions (down 0.72%), oil and natural gas exploration and production (down 0.58%), amusement and recreation (down 0.44%) and health care (down 0.38%). None of them were among the previous week’s worst finishers, nor were any of them among the best performers either that prior week.

Metals mining among leaders

On the upside, metals mining (up 0.51%) was last week’s best-performing major-sized sector – a significant turnaround from the Feb. 27 week, when it had been among the underperformers with a paltry 0.10% return. But the metals miners had been among the Top Five best performers for the two weeks before that, making last week their third week in the last four among the elite finishers.

Other large-sized sectors showing relative strength this past week included printing and publishing (up 0.36%), holding companies and other investment offices (up 0.24%) and the non-computer electronics manufacturing and real estate sectors, both of which were up by 0.21%.

It was the second straight week in the select circle for the printers and publishers, who had been there the previous week with an even 1.00% return.

In contrast, the holding companies had been among the Bottom Five worst performers the previous week with a mediocre 0.34% return, during a strong week for most other sectors.

Lodging retakes lead for year

On a year-to-date basis, with nine weeks in the books, the lodging sector (up 4.83%) moved up by one notch in the standings to reclaim its previous perch as best performer so far, toppling the food stores, which had held the top spot for four straight weeks. Before that, lodging had also been the best sector for three straight weeks, through the week ended Jan. 30; after that, the innkeepers had been bumped into the runner-up spot, where they stayed for the next four weeks.

With lodging having thus moved up, petroleum refining (up 4.72%) rose by two positions, to second-best on the year so far, from just fourth-best the week before.

Metals mining (up 4.43%), on the strength of its weekly performance, as noted, jumped to Number-Three on the year so far, despite having not been among the cumulative leaders the week before.

That pushed electric and gas utilities (up 4.30%) down by one slot, to fourth-best, after having been third-best the week before; the utilities have now been fourth-strongest in two weeks out of the last three and four weeks out of the last six.

The food stores (up 4.07%) tumbled by four spaces to just fifth-best on the year, after having been on top the previous four weeks, as noted.

On the downside, coal mining’s return to its more customary role as worst weekly performer after an atypically strong four weeks before that cemented its position as worst performer year to-date, its eighth straight week at the bottom of the pile. It fell back into the red (down 0.90%), where it has been for most of this year, versus its modestly positive 0.71% cumulative return the week before.

Holding companies and other investment offices (down 0.32%) fell by one notch to second-worst on the year from third-worst, as it changed places with the previous week’s second-worst performer, transportation equipment manufacturing (up 0.98%), which was only third-worst in the latest week. That sector has now been third-worst in three weeks out of the last four.

Wholesale durable goods distributors (up 1.46%) deteriorated by one position, to fourth-worst on the year from fifth-worst the week before.

Securities and commodities brokers, dealers and exchanges (up 1.54%) fell into that vacated fifth-worst slot, despite having not been among the worst year-to-date performers the week before.

© 2015 Prospect News.
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