The risk of default mostly fell for US-based publicly traded companies in the second quarter as equity markets put together a strong rally.
Only the utilities sector registered a sequential increase in its medial market signal one-year probability of default score, according to S&P Global Market Intelligence data, but even then that measurement ticked up just a single basis point to 0.29%.
Healthcare remained the most vulnerable US sector at the close of the second quarter, though its median probability of default score fell to 4.7% on June 30 from 5.2% three months earlier. The scores, which represent the odds of default within a year, are based primarily on the volatility of share prices for public companies and account for country- and industry-related risks.
US stocks broadly moved up in the second quarter, with the S&P 500 climbing nearly 10% in the period. The index rose 6.5% in June alone.
Equity market volatility is also receding. The CBOE Volatility Index — commonly referred to as the market's "fear gauge" — has retreated from its recent peak in October 2022 and is approaching its lowest point in the last 12 months.
Most, least vulnerable
Drug retail registered the highest median probability of default score among US industries at the end of the second quarter at 10.8%, according to Market Intelligence data.
Other industries in the healthcare sector also ranked among the most vulnerable. Within the sector, distributors, technology companies, and providers of equipment and services had median probability of default scores of 9.7%, 7.3%, 6.4% and 5.0%, respectively.
Asset managers and custody banks was the least vulnerable US industry at the close of the second quarter with a default score of 0%.
Biggest increases, decreases
Data processing and outsourced services was the industry with the highest rise in default risk, with the median probability of default score of 11 companies rising by 1.5 percentage points. Real estate operating companies and industrial conglomerates tied for the second-highest increase in median default probability at 1.4 percentage points.
Home improvement retailers, meanwhile, notched the largest quarterly decline at 2.7 percentage points.