By Sam Forgione
NEW YORK Feb 7 Fund investors worldwide pulled
a record $28.3 billion out of stock funds in the week ended
Wednesday after mixed U.S. economic data fueled concerns of a
major downturn in U.S. stocks, data from a Bank of America
Merrill Lynch Global Research report showed on Friday.
The outflows from stock funds in the week ended Feb. 5 were
the biggest, in dollar terms, since records began in 2002,
according to Bank of America Merrill Lynch, which also cited
data from fund-tracking firm EPFR Global. Bond funds, meanwhile,
attracted a record $15 billion in new cash.
Funds that specialize in U.S. stocks were hit hardest, with
outflows of $24 billion, with most of the withdrawals coming
from exchange-traded funds, according to the report. The weekly
outflows from U.S.-focused stock funds were also a record in
The outflows from stock funds and inflows into bond funds
underscored investors' nervousness that U.S. stocks, which
rallied to record highs in 2013 on the heels of the Federal
Reserve's monthly bond-buying, could suffer a steep pullback.
"Now that the Fed is starting to turn off the spigot, people
are unwinding some of their risk," said Robert Francello, head
trader at Apex Capital in San Francisco.
Investors reacted strongly on Feb. 3 to a
weaker-than-expected Institute for Supply Management report
showing U.S. manufacturing activity slowed sharply in January,
with the benchmark Standard & Poor's 500 stock index
recording its worst single-day drop in seven months.
The S&P 500 fell 1.3 percent over the entire weekly period.
Fears of a protracted capital flight out of emerging market
assets also lingered, leading investors to pull $6.5 billion out
of emerging market stock funds. That extended withdrawals from
the funds to 15 weeks, the longest outflow streak on record.
Investors' risk aversion drove them into bond funds, which
attracted their largest weekly inflows, in dollar terms, on
Funds that mainly hold safe-haven U.S. Treasuries attracted
$13.2 billion of the roughly $15 billion total, although the
report said asset manager Good Harbor Financial pulled cash out
of the SPDR S&P 500 ETF Trust and poured money into ETFs
that hold Treasuries, likely accounting for $10 billion of the
total inflows into Treasury funds.
The weaker-than-expected data on U.S. factory activity
spurred safe-haven bids, pushing the yield on the benchmark
10-year U.S. Treasury note down to 2.57 percent on
the day of the release, its lowest since the beginning of
November. Bond yields move inversely to prices.
Investment-grade bond funds attracted $4.2 billion in new
cash, marking the biggest inflows into the funds since May of
last year, but investors shunned riskier high-yield bond funds.
Those funds posted outflows of $1.2 billion, their biggest since
"Worries seemed to peak for the moment earlier this week,"
said Jake Lowery, portfolio manager with ING U.S. Investment
Management in Atlanta. "Flows into bond funds were driven
primarily by the risk-off sentiment."
Commodities funds also posted their 13th straight week of
outflows, bringing withdrawals this year to $2 billion. Gold
prices rallied on safe-haven buying on the weak U.S.
factory data, but retreated from their highs later in the week
after U.S. services sector data showed a pickup in growth,
leaving investors uncertain about the pace of the U.S. recovery.