By Sam Forgione
NEW YORK, March 7 Investors poured $5.67 billion
in new cash into U.S.-based stock funds in the latest week, the
largest in four weeks, as the Dow Jones industrial average
surged to a record high, data from Thomson Reuters' Lipper
service showed on Thursday.
"The signal of the Dow hitting its all-time high feeds into
investors' recent enthusiasm for stock funds," said Matthew
Lemieux, analyst at Lipper.
Among the total inflows into stock funds, 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 big inflows show that investors pounced on equities in
the wake of the Dow hitting a record high of 14,253.77 points on
March 4. Over $4 billion of the new money into stock funds made
their way into portfolios that hold U.S. stocks, the most in
five weeks. Mutual funds and ETFs that hold stocks of companies
outside the U.S., meanwhile, attracted less than half that
amount with $1.62 billion in new cash.
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 gave $1.1
billion to corporate loan funds, but vowed for some safety in
investment-grade corporate bond funds with $800 million in new
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 index closed at a record high on March 4 of 14,253.77
points, breaking the Oct. 9, 2007 closing record which preceded
the 2008 credit crisis and recession. The index then surpassed
that record on Mar. 5, 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
Fed Chairman Ben Bernanke defended the stimulus program in
his testimony before the Senate Banking Committee on Feb. 26.
Vice chairwoman Janet Yellen also backed the aggressive stimulus
effort on March 4.
The benchmark S&P 500 also rose 1.7 percent over the
reporting period on upbeat 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.
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 Mar. 6. That day, the benchmark
10-year Treasury also fell in price to yield 1.94 percent at the
close of trading.
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):
ector Flow Chg % Assets Count
($Bil) Assets ($Bil)
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