Advantage Data: Lodging leads as junk major sectors continue rebound; coal slide continues

By Paul Deckelman

New York, May 26 – The junk market moved higher last week for a second consecutive week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc.

That upturn follows a two-week losing streak, which in turn had halted a six-week winning streak dating back to mid-March.

With 20 weeks now in the books so far this year, last week’s rise was the 15th 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 22 of those more sizable sectors closing in the black during the week ended Friday, with eight sectors ending in the red.

That strengthened the trend seen the week before, ended May 15, when 19 sectors had shown gains and 11 had suffered losses.

The week before that, ended May 8, on the other hand, saw 16 of those larger sectors end in negative territory, while 13 sectors were positive and one other sector was unchanged on the week, showing neither a gain nor a loss.

In the latest week, lodging 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 fourth consecutive week.

Not surprisingly, coal was also the worst year-to-date finisher among the big sectors for a 19th successive week, while the lodging sector remained on top year to date for a 12th week in a row.

Index turns softer

While a clear majority of the main sectors did better last week, other statistical indicators of general market performance, however, were lower versus where they had finished the previous Friday, their second week in the last four on the downside. Before that, they had been mixed for two consecutive weeks and for four weeks out of the previous five, after having risen week over week for three weeks before that, dating back to late March.

The Merrill Lynch High Yield Master II index closed lower on the week, after having moved up during the two previous weeks, and in eight weeks out of the prior nine. It had last previously been in retreat during the week ended May 1, which had been its first weekly loss after six straight weekly gains going back to mid-March.

The index lost 0.014% on the week, after having gained 0.037% the week before.

That brought the index’s year-to-date return down to 3.896% as of Friday from 3.91% at the end of the previous week. It also 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 risen to 6.012% from 6.009% 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.

Its spread to worst over comparable Treasury issues tightened to 458 basis points from the previous week’s 466 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.

Lodging leads the way

Back on a sector-by-sector basis, Advantage Data meanwhile showed the lodging sector as the best performer among the significantly sized groupings, gaining 0.56%.

It was the hoteliers’ second consecutive week among the Top Five best-performing sectors, having also been there the week before with a 0.31% gain.

Other sectors showing strength in the latest week included the food manufacturing and food stores sectors, each of which were up by 0.44%, plus printing and publishing (up 0.39%) and petroleum refining and real estate (both up 0.33%).

It was the third straight week among the elite finishers for the refiners, who had also been there the week before with a 0.29% advance.

Printing and publishing, on the other hand, had been among the bigger losers the week before, with a 0.14% decline.

Coal extends retreat

On the downside, in what has come to be a familiar story, coal mining posted the worst performance by any of the significantly sized sectors, a 2.27% loss on the week.

It was the fourth 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, and in the May 15 week when it fell by 2.31%.

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

That losing streak was only interrupted during the week ended April 24, when coal atypically put on a rare – and short-lived – show of strength and led all of the key sectors with a 2.19% return. Then it was back to business as usual.

Coal has now also been among the Bottom Five worst large-sized performers in seven weeks out of the last eight, and in 10 weeks out of the last 12.

Other sectors ending in the red this past week included oil and natural gas exploration and production (down 0.33%), paper manufacturing (down 0.25%), telecommunications (down 0.12%) and metals mining (down 0.06%).

It was the second straight week among the Bottom Five for both the papermakers and the metals miners, who had been there the week before as well with respective losses of 0.14% and 0.38%. The metals miners have recently turned downward after four straight weeks before that during which the sector had been 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 11.35%) was the best cumulative performer for a 12th consecutive week.

Food stores (up 8.14%) moved up by three slots to second-best; the grocers have now been in the runner-up position in two weeks out of the last three.

Holding companies and other investment offices (up 6.10%) moved up by one position in the rankings, to third-best from Number-Four the week before.

It traded places with oil and natural gas exploration and production (5.38%), which fell into the fourth-best position – a familiar spot which the energy sector has now held in four weeks out of the last five.

Petroleum refining (up 5.06%) tumbled three rungs on the ladder this past week to just fifth-best, after having been second-strongest in three weeks out of the previous four and in four weeks out of the prior six.

Coal clings to the bottom

On the downside, coal mining remained the worst finisher year to date for a 19th straight week, as its loss grew to 10.80%. It was the only significantly sized sector finishing in the red on a cumulative basis this week.

Transportation equipment manufacturing (up1.24%) deteriorated to second-worst on the year, after previously having been third-worst on the year for two straight weeks.

It switched places with securities and commodities brokers, dealers and exchanges (up 1.44%), which improved to “just” third worst, after having been the second-worst year-to-date performer for five straight weeks.

Wholesale durable goods distributors (up 1.70%) fell by one position, to fourth-worst on the year from Number-Five. It has now been the fourth-worst major sector in two weeks out of the last three.

Industrial machinery and computer equipment manufacturers (up 2.20%) slid to fifth-worst on the year, despite having not been among the worst year-to-date performers the week before.

© 2015 Prospect News.
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