U.S.-based stock funds take in $5.7 billion latest week: Lipper
Investors poured $5.67 billion in new cash into U.S.-based stock funds in the latest week, the largest inflow in four weeks, as the Dow Jones Industrial Average hit a record high, data from Thomson Reuters' Lipper service showed on Thursday.
The Dow's move "feeds into investors' recent enthusiasm for stock funds," said Matthew Lemieux, analyst at Lipper.
Stock mutual funds and exchange traded funds (ETFs) have raked in $48.5 billion in new cash so far this year. Over the same stretch last year, investors put $18.8 billion into the funds. Those inflows preceded sharply negative sentiment that led to outflows of $18 billion from stock funds and ETFs throughout 2012.
Among the total inflows into stock funds in the latest week, exchange-traded funds captured $2.5 billion of the total demand in the week ended March 6, while stock mutual funds took in $3.17 billion. The Dow reached a record high of 14,253.77 points on March 5.
Over $4 billion of the new money coming into stock funds made its way into portfolios that hold U.S. stocks, the most in five weeks. Mutual funds and ETFs that hold stocks of companies outside the United States, meanwhile, attracted $1.62 billion.
The appetite, or lack thereof, for equities serves as an important barometer of investor confidence and how people feel about the state of economic growth.
Positive data over the week pointed to signs of a strengthening U.S. recovery. A drop in new U.S. claims for jobless benefits, growth in U.S. factory activity, and a rise in consumer sentiment in February boosted sentiment early in the week.
Mutual funds that invest in U.S. stocks attracted $753.2 million and international stock mutual funds saw $2.4 billion in the latest week.
Mutual funds are thought to represent the retail investor while ETFs are generally believed to represent the investment behavior of institutional investors.
Within the U.S. stocks ETF figure, there was $3.3 billion going in and $790 million coming out of funds that hold stocks outside of the United States.
The demand into stock funds did not, however, cut into cash commitments toward taxable bond funds, which reached a strong $5.26 billion over the weekly reporting period. Those were the largest cash gains since early November.
The demand for bond funds showed a renewed hunger for yield, as investors gave new money to "floating rate" corporate loan funds and high-yield "junk" bond funds.
"Investors, once again, really focused on yield," said Lemieux of Lipper.
Investors gave $820 million in new cash to high-yield bond funds after four weeks of redemptions. They also poured $1.1 billion to corporate loan funds, but opted for some safety in investment-grade corporate bond funds with $800 million in new cash commitments.
In the latest week, investors shrugged off risks to the U.S. economy stemming from $85 billion in federal spending cuts and political stalemate in Italy to drive record rallies in the Dow Jones Industrial Average.
The Dow's high of 14,253.77 points on March 5 broke the October 9, 2007 closing level which preceded the 2008 credit crisis and recession. The index then surpassed that record on March 6, when it closed at 14,296.24.
The index is up 9.35 percent so far this year.
The U.S. Federal Reserve's easy monetary policy and commitment to keeping short-term interest rates near zero fueled the rally, along with the European Central Bank's pledge to maintain a loose monetary policy.
The Federal Reserve is currently buying $85 billion in bonds each month and has said it plans to keep purchasing assets until it sees a substantial improvement in the outlook for the labor market.
The benchmark S&P 500 also rose 1.7 percent over the reporting period. In addition to positive data early in the week, other data showing that the U.S. services sector expanded at its fastest pace in a year in February and that private sector hiring picked up over the month also supported the market rally.
The positive data - together with the belief that global central banks such as the Fed, ECB, Bank of Japan, and Bank of England would keep monetary stimulus in place - muted concerns of the "sequester" spending cuts and worries that Italy's political turmoil could worsen the euro zone debt crisis.
The S&P 500 has risen 8.3 percent so far this year. The rally over the latest week pushed the index to just 1.5 percent below its record close on March 6. That day, the benchmark 10-year Treasury also fell in price to yield 1.94 percent at the close of trading.
Money market funds, which are low-risk vehicles that invest in short-term securities, suffered outflows of $12.9 billion over the week. Institutional investors, who put their money in stock ETFs, accounted for nearly all of the redemptions.
"People are pulling money out of money markets. They're giving up on their negative yields and going back toward risk," said Lipper's Lemieux.
The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the week, including exchange-traded funds (in $ billions):
Sector Flow Chg ($Bil) % Assets Assets ($Bil) Count All Equity Funds 5.672 0.19 3,084.937 10,130 Domestic Equities 4.049 0.18 2,306.195 7,513 Non-Domestic Equities 1.624 0.21 778.741 2,617 All Taxable Bond Funds 5.256 0.34 1,567.084 4,870 All Money Market Funds -12.884 -0.54 2,354.584 1,367 All Municipal Bond Funds -0.097 -0.03 325.387 1,361
(This story corrects dates of Dow records: in paragraph 4 to March 5 from March 4, and in paragraph 16 to March 5 and 6 from March 4 and 5.)
(Reporting by Sam Forgione; editing by Andrew Hay)