Advantage Data: Junk sectors open new year with seventh straight gain

By Paul Deckelman

New York, Jan. 9 – The junk bond market opened the new year during the latest reporting week (ended Jan. 6) pretty much as it had ended the old year the week before, ended Dec. 30, moving strongly higher, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

It was the seventh consecutive week of strength, with nearly all significantly sized sectors ending in positive territory.

The sectors have been heading higher ever since decisively breaking out of a rut in late November, when they snapped a four-week-long losing streak.

Those four weeks of losses, running through the week ended Nov. 18, had, in turn, followed five straight weeks of gains before that, lasting through the week ended Oct. 21.

In the latest 10 weeks, dating back to the week ended Nov. 4, there have been seven weeks of gains, versus three weeks of losses during that stretch.

On a somewhat longer-term basis, in the 52 weeks of 2016, gainers dominated in 39 of those weeks, versus 13 weeks in which more negatives were seen.

For a second consecutive week, 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 32 of those bigger sectors finishing in the black last week, versus only one ending in the red, just as had been the case during the Dec. 30 week.

That, in turn, was little changed from the results seen in the week ended Dec. 23, when 31 sectors had shown gains and only two had losses on the week.

The past three weeks have represented a solid improvement from the mediocre pattern seen during the week ended Dec. 16, when 18 of those key sectors had shown gains, with 15 showing losses.

The most recent seven weeks have represented virtually a complete reversal from the week ended Nov. 18 – the most recent negative week recorded – when 29 of the sectors had ended in negative territory, versus only three sectors ending on the plus side, as well as one unchanged sector showing neither a gain nor a loss on the week.

Among specific large-sized sectors during the Jan. 6 week, chemical manufacturing posted the biggest gain, while coal mining was the only sector actually showing a loss.

With one week in the books for 2017, those sectors also currently hold the places of the best and worst sectors on a year-to-date basis, respectively.

Chemical companies outperform

Chemical manufacturing – the sector which includes recently volatile pharmaceutical makers – turned in the strongest performance of any large-sized sector last week, as noted, rising 1.71% on the week.

It was the sector’s second straight week among the Top Five best-performing large-sized sectors, having also been in that select circle during the Dec. 30 week with a 0.51% gain.

Also showing strength during the latest week were three sectors all recording a 1.47% gain on the week – health care services, oil and natural gas extraction and oilfield services – as well as lodging (up 1.41%).

It was health care’s third consecutive week in the Top Five, having also been there during the Dec. 30 week – when, in fact, it had been the best-performing major sector with a 0.55% gain – and in the Dec. 23 week, when it posted a 0.45% advance.

Oilfield services was making a return visit to the Top Five, having also been there in the Dec. 30 week with a 0.53% gain; it has now been among the Top Five finishers in four weeks out of the last six, including the week ended Dec. 16, when it was up by 0.97%, leading all of the major sectors that week.

Coal starts year in a hole

On the downside, coal mining lost 0.06% on the week, the only one of the large-sized sectors actually posting a negative return, as noted.

It was a relatively rare dip into the red for coal, which in 2016 was consistently among the best-performing sectors for most weeks out of the year after having overcome a rocky start.

With coal the only sector showing a loss, the Bottom Five list of worst-performing large-sized sectors last week was rounded out by sectors merely showing smaller gains than all of the others.

These included non-computer electronics manufacturing (up 0.14%), miscellaneous retailing (up 0.41%), non-depository credit institutions (up 0.42%) and securities and commodities brokers, dealers and exchanges (up 0.46%).

With the exception of coal – a Top Five finisher during the Dec. 23 week – none of last week’s other underperformers had been among either the Bottom Five or the Top Five in the previous two weeks.

Chemicals best, coal worst

With just one 2017 week having gone by, the week’s best- and worst-performing sizable sectors were also the leaders and the laggards so far on a year-to-date basis, with virtually the same-sized returns and essentially in the same order.

In 2016, coal mining had finished out the year with the best cumulative return (up 137.40%), holding the top spot for the last six weeks of the year and in 11 weeks out of the final 13.

Health care – despite a pair of strong weekly showings to end the year – closed out 2016 with just a 5.47% cumulative return, the worst of any significantly sized sector for the last four weeks of the year.

© 2015 Prospect News.
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