Advantage Data: Coal mining back on the bottom as junk major sectors’ winning streak ends

By Paul Deckelman

New York, May 4 – For the first week in the last seven, the junk market moved lower last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That retreat snapped a six-week winning streak, which had dated back to mid-March. Before that had come a two-week slump in early March, which in turn had followed six consecutive weeks of gains before that.

Last week’s downturn was just the fourth recorded so far this year, against 13 weeks on the upside.

A subset of the 30 most significantly sized sectors (out of the total of 59 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 18 of those more sizable sectors closing in the red during the week ended Friday, with nine sectors ending in the black and three sectors unchanged, showing neither a gain nor a loss on the week.

That represented a sharp reversal from the pattern seen in the previous week, ended April 24, during which 23 sectors had shown gains, six sectors had shown losses and one other sector was unchanged.

In the latest week, coal mining – after a rare show of strength in that previous week, when it had turned in the best performance of any of the large-sized sectors – reverted to its usual form this week, recording the biggest loss of any of them. Not surprisingly, it also remained trapped right at the bottom of the mineshaft on a year-to-date basis for a 16th consecutive week.

The lodging sector, meantime showed the best weekly performance of any of those key sectors – although that wasn’t saying very much – and it also remained on top year to date for a ninth week in a row.

Index in retreat

Other statistical indicators of general market performance, meanwhile, were lower last week versus where they had finished out the previous Friday, after two consecutive weeks of having been mixed and three weeks before that of rising week over week.

The Merrill Lynch High Yield Master II index, for instance, posted its first weekly decline following six straight weekly gains.

It lost 0.102% on the week as of Friday’s close, versus the previous week’s 0.243% advance.

The index’s year-to-date return so far as of Friday had fallen to 3.791% versus 3.897% at the end of the previous week, and was down as well from its peak level for the year of 3.952%, set last Monday.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst had increased to 6.027% from 5.869% and remained above the 5.843% seen on Feb. 27, its low for the year. However, the yield was still well below its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues, though, had tightened a little to 465 basis points from the previous week’s 468 bps. It was still wider than the 451 bps recorded on March 2 and again on March 3, its tightest spreads for the year so far, but it was well in from the 513 bps reading seen on the last day of 2014.

Coal back in the red

Back on a sector-by-sector basis, Advantage Data meanwhile showed coal mining posting the worst performance by any of the significantly sized sectors, losing 0.40% on the week.

Coal had the dubious distinction of having gone from first to worst; the week before, it had been red-hot, notching the strongest showing of any of those major sectors with a 2.19% jump.

However, that rare show of strength by the coal miners was decidedly atypical; the grouping had spent three straight weeks before that and six weeks out of the prior seven languishing on the Bottom Five list of the worst-performing large-sized sectors. The latest week’s loss now extends that pattern of weakness to four weeks out of the last five and seven weeks out of the past nine. It has now also been the single-worst key sector in two weeks out of the last three.

Other sectors ending in the red this past week included depository financial institutions (down 0.14%), electric and natural gas utilities (down 0.10%), non-depository credit institutions (down 0.09%) and holding companies and other investment offices (down 0.08%).

None of those sectors other than coal had been among either the worst-performing major sectors or the best-performing the previous week.

Lodging leads for weak

On the upside, the lodging sector was the best performer among the significantly sized sectors, but it was king of a relatively small hill, leading the way with just a sedate 0.19% gain on the week.

Other sectors making this past week’s Top Five best performers list included oil and gas exploration and production (up 0.18%), metals mining (up 0.11%), automotive services (up 0.07%) and industrial machinery and computer manufacturing (up 0.05%).

The latter sector was among the elite performers for a second straight week, having also been there the week before with a 0.48% improvement.

It was the third straight week among the leaders for metals mining, which had also been there the previous week with a 1.21% gain.

And it was the fourth straight week among the better gainers for the energy E&P names, which had notched a 0.47% rise the week before.

In contrast, automotive services had spent the previous week among the Bottom Five with a 0.09% loss.

YTD: Lodging again on top

On a year-to-date basis, the lodging sector (up 9.13%) was the best cumulative performer for a ninth consecutive week.

Petroleum refining (up 7.37%) was in the runner-up spot for a second straight week and for the third time in the last four weeks, while food stores (up 7.25%) was close behind in third place, also for a second straight week and for a third week in the prior four; the two sectors have been alternating in the second and third positions for the past five weeks.

Oil and gas E&P (up 4.97%) held onto fourth place for a second week in a row.

Non-computer electronics manufacturing (up 4.43%) moved up to fifth-best on the year, despite not having been among the best year-to-date sectors the previous week.

Coal clings to the bottom

On the downside, coal mining remained the worst finisher year to date for a 16th straight week, with a 7.09% cumulative loss.

For a third consecutive week, securities and commodities brokers, dealers and exchanges (down 0.63%) was the second-worst sector on the year and along with coal was the only other significantly sized sector in negative territory for the year.

Wholesale durable goods distributors (up 1.48%) worsened to third-worst on the year, after having been just fifth-worst the previous two weeks; the group has now also been third-worst in two weeks out of the last four.

Transportation equipment manufacturing (up 1.75%) stayed on as fourth-worst on the year for a third week in a row.

Non-depository credit institutions (up 2.28%) fell to fifth-worst on the year, despite not having been among the year’s biggest losers so far the week before.

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