U.S.-based stock funds attract $6.61 bln, most in 7 weeks -Lipper

Thu May 2, 2013 8:27pm EDT

By Sam Forgione
    NEW YORK, May 2 (Reuters) - Investors in funds based in the
United States poured $6.61 billion into stock funds in the
latest week, marking a recovery from the prior week's outflows
as the S&P 500 hit record highs, data from Thomson Reuters'
Lipper service showed on Thursday.
    The new cash into stock funds in the week ended May 1 is the
most in seven weeks, and marks a turnaround from the prior week,
when investors pulled $7.3 billion out of the funds. Those
outflows were the most since July of last year.
    Stock exchange-traded funds took in $4.72 billion of the new
cash, up from the prior week's steep outflows of $8.4 billion.
Stock mutual funds, meanwhile, attracted $1.9 billion in new
cash, up from $1.07 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. 
    "People were more optimistic on some corners of the market
with respect to earnings season," said Jeff Tjornehoj, head of
Americas research at Lipper. 
    With regard to earnings, 342 companies in the S&P 500 had
reported by the end of Lipper's weekly reporting period. Among
those, 68.7 percent had beaten expectations while just 43.2
percent had reported better-than-expected revenue. Those revenue
results, however, fall below the average rate over the past four
quarters. 
    Among the inflows into stock funds, those that hold only
U.S. stocks pulled in $4 billion, a reversal from the prior
week's outflows of $8 billion. The iShares:Russell 2000 index
fund was the top gainer with inflows of $1.66 billion. 
    "Investors were more confident in the state of small cap
stocks," said Tjornehoj of Lipper, in reference to index's
exposure to small capitalization companies. 
    Tjornehoj said that investors flocked toward small-cap
companies since they are less reliant on earnings from business
outside the United States, and are consequently less exposed to
Europe's debt crisis.
    Even as the index hit record highs, the S&P 500 rose just
0.25 percent over the reporting period. Weaker-than-expected
growth in U.S. gross domestic product in the first quarter and a
report that private employers added just 119,000 jobs in April
dampened sentiment.
    Still, improved data on U.S. unemployment at the start of
the week and expectations that the Federal Reserve would keep
its $85 billion bond-buying program unchanged at a two-day
meeting boosted stocks over the period. 
    The S&P 500's record highs at the end of the week did not
keep investors from pulling $427.32 million out of the SPDR S&P
500 ETF Trust, which stemmed from investors favoring
smaller companies on account of their lesser exposure to
overseas markets, according to Tjornehoj of Lipper.
    The SPDR Gold ETF suffered the biggest outflows
among ETFs of $830 million, which still marked an improvement
from the prior week's outflow of $1.92 billion. Gold bullion
suffered its biggest-ever daily trading loss on April 15. 
    ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
    Funds that hold stocks outside of the United States also saw
higher demand with inflows of $2.6 billion over the reporting
period, the most since mid-February. MSCI's all-country world
equity index rose 1.2 percent over the weekly
period. 
    Funds that hold European stocks pulled in $197.3 million in
new cash, the most since mid-January and a rebound from six
straight weeks of outflows. Within that group, funds that hold
stocks in the United Kingdom took in $56 million in new cash,
while funds that hold Italian stocks took in $35 million. 
    Italy formed a broad coalition government under new Prime
Minister Enrico Letta over the week after two months of
inconclusive general elections, which investors welcomed in the
middle of Lipper's reporting period. 
    Japanese stock funds continued to absorb high demand with
inflows of over $921 million. The funds attracted $1.67 billion
in the week ended April 17 - the highest on record - in the wake
of the Bank of Japan's announcement on April 4 that it would
inject roughly $1.4 trillion into its economy to fight
deflation, mainly through purchases of long-term Japanese
government bonds.
    Amid the strong support for stocks, taxable bond funds took
in $3.07 billion, down from $4.76 billion and the weakest
turnout in four weeks. Investment-grade corporate bond funds
pulled in $1.33 billion in new cash, down from $2.24 billion,
while funds that hold riskier high-yield "junk" bonds attracted
$474.2 million.
    Funds that hold Treasuries bled $370 million over the week,
the first outflows from the funds in seven weeks. The price of
10-year Treasuries rose, however, at the end of Lipper's
reporting period to yield 1.64 percent after the Fed announced
it would continue its asset purchases. 
    Money market funds, which are low-risk vehicles that invest
in short-term securities, suffered outflows of $19.35 billion
over the week after outflows of $4.4 billion the previous week. 
    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   %       Assets     Count
                           ($Bil)     Assets  ($Bil)     
 All Equity Funds          6.607      0.20    3,254.428  10,194
 Domestic Equities         4.005      0.17    2,406.557  7,536
 Non-Domestic Equities     2.602      0.31    847.871    2,658
 All Taxable Bond Funds    3.075      0.19    1,617.938  4,921
 All Money Market Funds    -19.349    -0.83   2,298.881  1,364
 All Municipal Bond Funds  -0.391     -0.12   328.490    1,373
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