By Sam Forgione
NEW YORK Feb 1 Investors in funds worldwide
poured $11 billion into U.S. stock funds in the latest week, the
most since September 2011, as the Dow Jones industrial average
flirted with the psychologically important 14,000 level,
data from EPFR Global showed on Friday.
Both mutual funds and exchange-traded funds that hold U.S.
stocks recorded strong inflows in the week ended Jan. 30. U.S.
stock ETFs attracted $9.6 billion of the inflows, while U.S.
stock mutual funds raked in $1.4 billion, the fund-tracking firm
said. The inflows accounted for much of the $18.76 billion that
flowed into stock funds worldwide.
The solid demand for stock funds last month was a sharp
contrast from 2012. Investors have given $53.8 billion to stock
funds worldwide in the past four weeks after having pulled $69.1
billion from the funds last year.
Sentiment toward stocks has improved dramatically on signs
of an upswing in the U.S. economy. Solid corporate earnings from
bellwether companies such as Procter & Gamble and
Honeywell International and encouraging labor-market and
factory data lifted market confidence. In addition, investors
were relieved after U.S. lawmakers delayed talks on raising the
debt ceiling until May.
What's more, stocks are also more attractive as an
alternative to middling yields on corporate and government
bonds, and the inflows to stock funds could signal a rotation
out of bonds.
"Clearly, equities have been on the rise," said Omer Esiner,
chief market analyst at Commonwealth Foreign Exchange in
Washington. He noted, however, that inflows to stock funds could
also be nearing a top if investors turn more bearish.
The spike in demand for U.S. stock funds in the latest week
marks a reversal from the previous week, when investors pulled
$1.28 billion from the funds. Those outflows were, however, a
result of institutional investors redeeming money from U.S.
stock ETFs, while retail investors gave $340 million to U.S.
stock mutual funds, EPFR Global said.
The huge inflows to funds that hold U.S. stocks exceed the
funds' cash gains of $10.35 billion in the first full week of
January, and also mark the fourth straight week of cash
contributions from individual investors.
Emerging market stock funds pulled in $3.59 billion in new
money, down modestly from the prior week's inflows. European
stock funds made a small comeback with gains of $1.19 billion,
compared with inflows of $573 million the previous week.
The big inflows into stock funds dwarfed demand for bond
funds worldwide, which gained $3.02 billion, down modestly from
inflows of $3.71 billion the prior week. Funds that hold U.S.
bonds pulled in $1.73 billion, just slightly greater than the
prior week's gains.
"It's the right direction for long-term investors to be
going into stocks from bonds," said Richard Sichel, who oversees
$1.5 billion as chief investment officer of Philadelphia Trust
Co. "U.S. companies are stronger than ever, financially," he
The benchmark S&P 500 rose just 0.5 percent over the
reporting period. On Friday, the Dow traded above 14,000 for the
first time since October 2007 and both indices were up about 1
Central banks also issued influential statements over the
week. The European Central Bank said banks would repay 137
billion euros from crisis loans, returning more cash earlier
than expected and improving sentiment.
In the United States, the Federal Reserve kept in place its
purchases of $85 billion in Treasuries and agency mortgage
securities on Wednesday.
The yield on the benchmark 10-year Treasury breached 2
percent in intraday trading on Friday after payrolls data showed
that employers created 127,000 more jobs in November and
December than previously reported.
Funds that hold emerging market bonds pulled in $1.53
billion in new cash, which was largely unchanged from the prior
week. Investors soured further toward European bond funds and
redeemed $1.01 billion, showing greater avoidance after the
prior week's outflows of just $53 million.