Advantage Data: Junk sectors fall for fourth straight week after snapping five-week upside run

By Paul Deckelman

New York, Nov. 21 – The junk bond market continued to languish in negative territory for a fourth consecutive week last week (ended Nov. 18), according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Those four weeks of losses have followed five straight weeks of gains before that, lasting through the week ended Oct. 21.

Gains and losses have each now been seen in five weeks out of the last 10, dating back to the week ended Sept. 16.

On a somewhat longer-term basis, in the 46 weeks since the start of the year, gainers have dominated in 33 of those weeks, versus 13 weeks in which more negatives were seen.

A subset consisting of the 33 largest sectors (out of the total of 61 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 red last week, versus just three sectors that ended in the black, with one other sector unchanged on the week, showing neither a gain nor a loss.

That represented a deterioration from the week ended Nov. 11, which saw 20 of the sectors posting losses versus 12 sectors showing gains, plus one unchanged sector.

Among specific large-sized sectors last week, health care services posted the biggest gain, while precision instrument manufacturing was the biggest weekly loser.

Metals mining was on top on a year-to-date basis, grabbing the crown away from coal mining, which had been the leader for three weeks before that, while food stores fell to the bottom of the pile as the worst year-to-date performer so far.

Precision instruments sink

On the downside, precision instrument manufacturing, largely consisting of medical device makers, had the worst showing of any significantly sized industry grouping last week, falling by 1.67%.

It was the sector’s second straight week among the Bottom Five worst-performing large-sized sectors, having also been there during the Nov. 11 week with a 0.99% loss.

Other key sectors showing weakness included metals mining (down 1.21%), electric and gas utilities (down 0.85%), depository financial institutions (down 0.76%) and midstream energy services (down 0.75%).

Electric and gas utilities marked their second week in the last three among the Bottom Five, having also been there during the week ended Nov. 11, when they lost 1.64%.

Last week was a comedown for metals mining, which had been among the top finishers in the Nov. 11 week with a 1.06% gain – its second week in three and its seventh week out of the previous 10 weeks among the Top Five best-performing sector. But the sector has now also been among the Bottom Five in two weeks out of the last three, including the Nov. 4 week, when it was, in fact, the worst performer of any major sector with at 2.17% nosedive on the week.

Health care: worst to first

On the upside, health care services was clearly the strongest major sector, gaining 0.67% on the week.

It thus achieved the unusual feat of going from worst to first, having been the single worst-performing sector in the Nov. 11 week, when it plunged by 3.02%, coinciding with a sharp drop in the bonds that week of such hospital operators as Community Health Services, Inc., Tenet Healthcare Corp. and HCA Inc., following the surprise victory of Donald Trump in the Nov. 8 U.S. presidential election; Trump has made the repeal of president Barack Obama’s signature health care law a key part of his election platform, but subsequently indicated that he was open to keeping certain provisions of the law, causing the hospital paper to rebound smartly last week.

Other key sectors showing gains in the latest week included lodging (up 0.06%) and oil and natural gas extraction (up 0.04%).

Chemical manufacturing was unchanged, showing neither a gain nor a loss for the week. It had previously been among the Bottom Five with a 1.14% loss in the Nov. 11 week.

Energy exploration and production (down 0.13%) rounded out the latest week’s Top Five list with the smallest loss among the major sectors.

Metals mining back on top

On a year-to-date basis, the metals mining sector regained the top spot last week, generating a 65.62% cumulative return, displacing the previous leader, coal mining. The miners moved up from second-best, where they had spent the previous three straight weeks and five weeks out of six.

Other strong performers year to date included energy E&P (up 35.44% on the year), oil and gas extraction (up 33.19%), coal (which, as noted, fell to just fourth-best on the year from the top spot with a 32.42% return) and primary metals processing (up 27.92% on the year).

Food stores falter

Among the weakest year-to-date performers, food stores were doing the worst with just a 4.34% return.

Not much better were automotive services (up 4.65%), depository financial institutions (up 5.44%), chemical manufacturers (up 5.45%) and health care services (up 5.92%).

Health care had been the worst-year-to-date performer in the Nov. 11 week, when it was also the worst weekly sector, as noted, but firmed on a cumulative basis as the sector also posted the best weekly gain last week.

© 2015 Prospect News.
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