Advantage Data: Utilities tops as junk major sectors snap two-week skid; coal slide continues

By Paul Deckelman

New York, May 18 –The junk market moved higher last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc., snapping a two-week losing streak.

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

Last week’s rise was the 14th weekly improvement recorded so far this year, versus five weeks on the downside.

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 19 of those more sizable sectors closing in the black during the week ended Friday, with 11 sectors ending in the red.

That was a contrast from the week before, ended May 8, when 16 sectors had shown losses, 13 had posted gains and one other sector was unchanged on the week, showing neither a gain nor a loss.

In the latest week, electric and gas utilities turned in the best performance of any of the significantly sized sectors, while coal mining had the biggest loss among any of them for a third consecutive week.

Not surprisingly, coal was also the worst year-to-date finisher among the big sectors for an 18th successive week, while the lodging sector remained on top year to date for an 11th week in a row.

Index rebound strengthens

Other statistical indicators of general market performance, meanwhile, were mixed last week versus where they had finished the previous Friday for a second consecutive week, after one week on the downside all around. It was the fourth week in the last five in which the indicators had been mixed; they had been rising week over week for three weeks before that, dating back to late March.

The Merrill Lynch High Yield Master II index closed higher for a second consecutive week last week and for an eighth week out of the last nine; it had been in retreat the week before, ended May 1, which had been its first weekly loss after six straight weekly gains going back to mid-March.

The index had gained 0.037% on the week as of Friday’s close, versus the previous week’s 0.079% upturn.

The index’s year-to-date return so far as of Friday had risen to 3.91% versus 3.872% at the end of the previous week, although it remained below its peak level for the year of 3.952%, set on April 27.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst had declined to 6.009% from 6.021% the Friday before. While it remained above the 5.843% seen on Feb. 27, its low for the year, the yield was still well below its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues rose slightly to 466 basis points from the previous week’s 464 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.

Utilities power up

Back on a sector-by-sector basis, Advantage Data meanwhile showed the electric and natural gas utilities sectors as the best performer among the significantly sized groupings, gaining 0.46%.

Other sectors showing strength in the latest week included holding companies and other investment offices (up 0.33%), lodging (up 0.31%) petroleum refining (up 0.29%) and primary metals processing (up 0.23%).

It was the refiners’ second straight week finishing among the Top Five best performers; they had also been there the week before with a 0.24% return.

Coal crushed again

On the downside, coal mining posted the worst performance by any of the significantly sized sectors, a 2.31% loss on the week.

It was the third straight week in which coal had the single worst results of any of those major sectors. It had also been the cellar-dweller during the week ended May 1, when it had lost 0.40%, and it remained in that role during the week ended May 8 with a 1.17% loss.

Coal has now been the worst large-sized performer in four weeks out of the last five, having also had that dubious honor during the week ended April 17, when it had dropped by 1.30%.

The sector has now been among the Bottom Five worst large-sized performers in six weeks out of the last seven and in nine weeks out of the last 11.

Other sectors ending in the red this past week included metals mining (down 0.38%), transportation equipment manufacturing (down 0.25) and three sectors each showing a loss of 0.14% on the week – non-computer electronics manufacturing, paper manufacturing and printing and publishing.

Last week was a comedown for the metals miners, which had spent the previous four weeks among the Top Five finishers, including the week ended May 8 when the grouping was up by 0.62%.

YTD: Lodging again on top

On a year-to-date basis, the lodging sector (up 10.54%) was the best cumulative performer for an 11th consecutive week.

Petroleum refining (up 7.24%), moved up one notch in the rankings, to second-best on the year. It has now been in the runner-up slot in three weeks out of the last four and four weeks out of the last six.

Oil and natural gas exploration and production (up 6.46%) moved up one position, to the third-best slot that had been vacated by the refiners, from fourth-strongest the week before, a position it had held for three straight weeks.

Holding companies and other investment offices (up 5.94%) – which, like the refiners, were among the week’s leaders, as noted – improved to fourth-best on the year, despite having not been among the leading year-to-date sectors the week before.

Food stores (up 5.45%) tumbled three slots, to just fifth-best from second-strongest the previous week.

Coal clings to the bottom

On the downside, coal mining remained the worst finisher year to date for an 18th straight week, as its loss grew to 9.03%. It was the only significantly sized sector finishing in the red on a cumulative basis this week.

Securities and commodities brokers, dealers and exchanges (up 0.61%) was the second-worst sector on a cumulative basis for a fifth straight week.

Transportation equipment manufacturing (up1.80%) was third-worst on the year for a second week in a row.

Metals mining (up 2.17%), deteriorated by one position, to fourth-worst from fifth worst the week before.

It switched places with wholesale durable goods manufacturing (up 2.29%), which improved, relatively speaking, to just fifth-worst on the year from fourth-worst the week before.

© 2015 Prospect News.
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