Advantage Data: Junk sectors break three-week skid to end year on higher note; coal worst for year

By Paul Deckelman

New York, Jan. 4 – The junk bond market staged a rebound in the final week of 2015, posting its first gain after three straight weeks of losses before that, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

It was only the third week out of the last 10 dating back to Oct. 30 in which more sectors posted gains than had shown losses; more gains had also been seen in that week ended Oct. 30, which was followed by four straight weeks on the downside, and then again in the week ended Dec. 4, followed by the most recent losing streak.

On a somewhat longer-term basis, with all 52 weeks of 2015 now in the books, the year saw 29 weekly advances recorded during that time, versus 22 weeks on the downside, and during the week ended Sept. 18, one week in which the sectors were evenly split, with neither gains nor losses having the edge.

Junkbondland, generally speaking, has been choppy ever since the end of a long upward surge in early May; after that, the market mostly experienced periods of several weeks of gains alternating with a couple of weeks of losses.

A subset of the 33 most significantly sized sectors (out of the total of 60 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 26 of those sectors finishing in the black this past week, against seven ending in the red.

That was a clear turnaround from the week before, ended Dec. 24, when 20 of those key sectors had shown losses and 13 had shown gains.

Among the specific large-sized sectors this past week, metals mining – usually found among the big losers – put on a rare show of strength to emerge as the top finisher.

Perennial loser coal mining had the biggest loss of any of the large sectors.

Coal also remained by far the worst-performing big sector on a year-to-date basis, where it has been for the last 51 consecutive weeks. It was coal’s fourth-straight year as the worst-performing large-sized sector.

Lodging ended the year as the best finisher, having held onto the cumulative-return top spot for a third week in a row and for a 43rd week out of the last 44.

Metals mining strikes gold

The metals mining sector (up 1.70% on the week) was the strongest-performing large-sized sector last week – quite a comeback from the previous six weeks during which it had finished among the Bottom Five worst-performing large sectors during that time, including the previous week, ended Dec. 24, when the miners had lost 1.46%.

Also showing strength this past week were oilfield services (up 1.50%) and two other sectors more usually found on the downside – energy exploration and production (up 0.94%) and oil and natural gas extraction (up 0.85%).

Industrial and commercial machinery and computer equipment manufacturing rounded out the latest week’s Top Five list of best-performing sectors with a 0.56% gain.

Both the energy E&P and oil and gas extraction sectors had been among the Bottom Five for the previous seven straight weeks, including the Dec. 24 week, when they had lost 6.36% and 5.85% that week, respectively; energy E&P had been the single worst-performing large-sized sector during both the weeks ended Dec. 18 and Dec. 24.

Coal continues to crumble

While some of the energy and resources-oriented sectors turned upward last week, as noted, longtime loser coal mining (down 2.64%) continued to take its lumps, finishing as the week’s single worst-performing major sector.

It was coal’s eighth consecutive week among the Bottom Five and its 11th week there in the last 12, a losing streak interrupted only by a rare upturn during the week ended Nov. 6 that improbably – and just temporarily – landed coal, along with the energy E&P and oil and gas extraction sectors, among the Top Five performers that week, a situation that was quickly reversed the week after that.

Coal had posted a 4.38% loss during the Dec. 24 week.

Also on the downside last week – though to a much lesser degree – were paper manufacturing (down 0.27%), building construction (down 0.16%), precision instrument manufacturing (down 0.12%) and petroleum refining (down 0.09%).

None of those other sectors had been among either the big losers or the big winners the previous week.

Lodging tops for the year

On a cumulative-return basis, all of the best-performing sectors were unchanged for a third consecutive week last week, relative to one another, from the positions they had held the week before.

The lodging sector (up 18.92%) easily took top honors as the strongest performing major sector of 2015. It was the innkeepers’ third straight week as the best year-to-date performer and their 43rd week on that exalted perch out of the previous 44 weeks. They had held that top spot for 40 consecutive weeks, a winning streak dating back to the week ended March 6. That long successful run was finally snapped during the week ended Dec. 11, when the food stores sector temporarily supplanted lodging due to a statistical glitch, although that was quickly reversed during the Dec. 18 week, carrying lodging through the end of the year in the top spot.

In 2014, real estate had been the year’s best-performing large sector, with a 9.50% return.

Food stores (up 6.76%) finished out 2015 in the runner-up spot, where the grocers have been over the last three weeks.

Depository financial institutions (up 6.13%) ended the year in third place, a position the group held for four straight weeks and in nine weeks out of the last 10.

Automotive services (up 5.63%) closed out 2015 as fourth-best, holding that position for the past four weeks in a row.

Securities and commodities brokers, dealers and exchanges (up 5.08%) held down fifth place in the rankings as the year closed, also for a fourth successive week. The sector was fifth-best in seven out of the last eight weeks of the year.

But as has been the case over the last few weeks, none of those cumulative-return leaders were also among the week’s best gainers.

Coal buried for a fourth year

On the downside, all of the worst sectors were unchanged last week, relative to one another, from the positions they had held during the previous six weeks, dating back to the week ended Nov. 20.

Coal mining continued to wallow at the bottom of the pile, ending the year with a 35.31% loss, the worst of any large-sized sector. It had been the worst cumulative performer for the past 51 straight weeks.

It was the fourth consecutive year in which coal – hurt by competition from cheap natural gas as well as government regulatory action – was the worst finisher of all of the major sectors. It had also been the worst performer in 2014, though its loss that year was only 10.59%. Coal was also at the bottom of the mineshaft in 2013 and 2012, when all of the major sectors showed gains – but coal’s was the smallest both of those years, at 4.35% and 4.66%, respectively.

Back to 2015, the energy E&P ended the year second-worst among the key sectors with a 30.41% loss. It was second-worst for the last 13 straight weeks.

Oil and gas extraction (down 26.89%) was ending at third-worst on the year, also in that slot for a 13th straight week.

Metals mining (down 14.26%) finished fourth-worst on the year, holding that spot for a seventh straight week and for a 10th week out of the last 11.

That was also the case with primary metals processing (down 12.44%), which ended fifth-worst on the year after having held that position for seven consecutive weeks and for 10 weeks in the last 11.

Coal was also the week’s single worst finisher, as noted, with energy E&P and oil and gas extraction among the week’s best performers.

© 2015 Prospect News.
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