Advantage Data: Junk bond sectors show gains for eighth straight week

By Paul Deckelman

New York, April 11 – The junk bond market remained anchored firmly in positive territory last week – its eighth consecutive week there, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

It was the ninth week out of the last 10 in which more sectors were posting gains than losses.

In the 14 weeks since the start of the year, gainers have dominated in nine of those weeks, versus five weeks in which more negatives were seen.

Besides last week’s upturn and the ones seen in the seven weeks before that, going back to the week ended Feb. 19, the sectors had also done better during the week ended Jan. 29, after having started the new year with three straight weeks on the downside, racking up five out of the first six weeks of the year showing losses.

A subset consisting of the 33 largest 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 29 of those bigger sectors finishing in the black in the latest week, versus just three sectors ending in the red and one sector which was unchanged, showing neither a gain nor a loss for the week.

That represented a continuation of the strongly positive trend seen the previous week, ended April 1, during which 28 of those sectors had shown gains while five had posted losses.

At least 20 of the large-sized sectors have been on the upside in all eight weeks of the current winning streak, and at least 30 of the sectors have shown gains in all but one of those eight weeks.

That, in turn, has marked a complete reversal of the breakdown seen during the week ended Feb. 12 – the most recent negative week – when all 33 of the large-sized sectors had posted losses, against no gains.

Among specific large-sized sectors last week, chemical manufacturing was the top performer.

Oil and natural gas extraction had the largest weekly loss among the key sectors.

Metals mining still remained the best performer so far on a year-to-date basis for a sixth straight week, while coal mining stayed at the bottom of the year-to-date rankings for an eighth week in a row.

Chemical makers concoct gains

Among specific large-sized sectors, chemical manufacturing turned in the best showing among the significantly sized sectors, gaining 2.50% on the week.

Also showing strength in the latest week were the coal mining and food stores sectors (both up 1.07%), building construction (up 0.83%) and electric and natural gas utilities (up 0.76%).

It was the grocers’ third straight week among the Top Five best-performing large-sized sectors; in fact, the food stores had actually been the single best performer in the week ended April 1, when they were up by an even 2.00%.

Coal, in contrast, has more often than not been among the worst-performing weekly sectors so far this year, including in the April 1 week, when it was at the absolute bottom of the mineshaft with a 2.49% loss. But the volatile sector has also shown occasional flashes of significant strength; last week was the second week in the last three during which it was among the top finishers. Coal, atypically, actually was the single best-performing sector during the week ended March 25, when it jumped by 3.69% on the week.

Neither last week’s leader, chemicals, nor building construction or the utilities, were among either the best performers or the worst performer in previous recent weeks.

Energy sectors lag

On the downside, oil and natural gas extraction (down 0.38%) and energy exploration and production (down 0.37%) were the two worst finishers among the large-sized sectors last week.

It was the second week among the Bottom Five underachievers for both; during the April 1 week, oil and gas had been off by 1.61%, while the E&P grouping lost 1.92% that week.

Before that, both sectors had – unusually – been among the best-performing sectors for several consecutive weeks.

The latest week’s Bottom Five list was rounded out by one more losing sector – industrial and commercial machinery and computer equipment (down 0.13%); one sector that showed neither a gain nor a loss on the week – metals mining – and one sector that only posted a razor-thin gain – securities and commodities brokers, dealers and exchanges (up 0.03% on the week).

It was the metals miners’ second week in the past three during which they had been among the worst weekly finishers; the miners were the single-worst performing grouping during the March 25 week, when they lost 1.02%.

Neither the machinery and computer manufacturers nor the financial brokers and exchanges sectors had been among either the worst laggards or the elite performers over the previous several weeks.

Metals mining tops on year

On a year-to-date basis, after 14 trading weeks so far in 2016, metals mining (up 16.88%) remained as the best-performing large-sized sector on a cumulative basis for a sixth straight week, despite its recently mediocre weekly returns, as noted. The miners had displaced miscellaneous retailing from the top spot after that latter sector had a six-week run up there.

Primary metals processing (up 13.70%) was in the runner-up spot for a sixth straight week.

Lodging (up 9.78%), clawed its way up by two notches in the rankings last week, to third place from just fifth-best the week before. The innkeepers had fallen into fifth in the April 1 week after having been fourth-best for four weeks and Number-Two for five straight weeks before that.

In 2015, lodging had been the single-best finisher among any of the large-sized sectors on the year, gaining 18.92%, on the strength of having held that exalted position over the last three weeks of the year and on a longer-term basis, in 43 out of the last 44 weeks of 2015.

Miscellaneous retailing (up 9.30%) fell by one slot last week into fourth place, after having held down the Number-Three slot for five straight weeks. The retailers, as noted, had previously been in the Number-One position for six weeks near the start of the year.

Midstream energy services (up 6.83%) retreated by one notch in the standings to just fifth-best from fourth-best the previous week. But it’s familiar turf for the sector, which has now been fifth-best in four weeks out of the last five.

None of the week’s top-finishing large-sized sectors, as noted, were also among the year-to-date leaders.

Coal remains YTD worst

On the downside, coal mining (down 21.76%) remained the absolute worst major sector on a year-to-date basis for an eighth consecutive week. It has now been the cellar-dweller in 10 weeks out of the last 11.

Coal had actually started out the new year during the week ended Jan. 8 as only second-worst on the year, then improved, relatively speaking, to just third-worst in the Jan. 15 week and to fifth-worst in the Jan. 22 week, before finally heading for the bottom of the pile during the weeks ended Jan. 29 and Feb. 5.

Before all of that, coal had ended 2015 as the absolute worst performer for the year, with a 35.31% loss, having had the biggest cumulative loss for 51 straight weeks last year. Coal had also been the single-worst large-sized performer in 2012, 2013 and 2014 as well.

Oil and gas extraction (down 1.81%) fell by one position in the standings, to second-worst on the year, after having been only third-worst on the year for two straight weeks before that, in six weeks out of the prior seven and on a longer-term basis, in 21 out of the previous 26 weeks.

Oil and gas traded places with energy exploration and production (down 0.99%), which gained one notch to just third-worst year to date, after having been second-worst for two straight weeks before that and for seven weeks out of the prior eight.

Printing and publishing (up 0.92%) and depository financial institutions (up 1.24%) fell to fourth-worst and fifth-worst last week, after having not been among the worst-performing large sectors on a cumulative return basis in recent weeks.

Oil and gas extraction and energy exploration and production were also among the worst weekly finishers, as noted, while coal was among the week’s best finishers, also as noted – although not by enough to matter on a year-do-date basis.

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