(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
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 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
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
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
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 Oct.
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
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
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 % 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
(Reporting by Sam Forgione; editing by Andrew Hay)