NEW YORK Fund investors worldwide poured $6.6 billion into stock funds in the week ended January 22 on optimism that stocks would push higher this year, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
The new demand brought inflows into stock funds so far this year to $16 billion, following a record inflow of $358 billion in 2013, according to the report, which also cited data from fund-tracking firm EPFR Global.
The inflows came even as the benchmark Standard & Poor's 500 .SPX stock index fell a modest 0.2 percent over the holiday-shortened week on some disappointing corporate earnings. The U.S. stock market was closed Monday for the Martin Luther King Jr. holiday.
"If you get a pullback, that's a natural time for people who have been wanting to buy to step in," said Michael Jones, chief investment officer of RiverFront Investment Group, with $4.3 billion in assets.
The S&P 500 index hit record highs last year and rallied nearly 30 percent, but some analysts believe the market may rally further this year.
Still, the inflows into stock funds were below the prior week's inflows of $9.4 billion. The earlier inflows were largely a result of a $6.5 billion cash surge into stock mutual funds, which are commonly purchased by retail investors.
Funds that specialize in European stocks attracted $4.3 billion, marking their 30th straight week of inflows.
Some investors have said the region's stocks offer buying opportunities after data last August showed the region exited a 1-1/2 year-long recession.
Investors also parked $30 billion in low-risk money market funds, which typically invest in safe short-term securities, marking their largest inflows in 7 weeks.
Investors likely sought money market funds partly on the weakness in stock markets, said Jonathan Lewis, chief investment officer of Samson Capital Advisors, which oversees over $7 billion.
Precious metals funds attracted small inflows of $33 million, marking their first inflows in 19 weeks. Those came even as the spot price of gold slipped about 1 percent on January 21, the most since the start of the year.
Emerging market stock funds, meanwhile, posted outflows of $2.4 billion, marking their biggest outflows in five weeks. The outflows marked a 13th straight week of withdrawals from the funds, the longest outflow streak in 11 years, according to the report.
MSCI's emerging markets equities index .MSCIEF fell 0.2 percent over the weekly period.
"There is a recognition that there are some real problems at the heart of some major emerging market economies," said Jones of RiverFront. He said investors feared a continued economic slowdown in Russia, Brazil, and China.
Bond funds worldwide attracted $2 billion, bringing inflows this year to $8 billion. Funds that hold high-yield bonds, which are considered risky since they have lower-quality credit ratings, attracted $1 billion of the new money, marking their fifth straight week of inflows.
Investors also had an appetite for safer bonds. Funds that hold higher-quality investment-grade corporate bonds attracted $1.6 billion, marking their fifth straight week of inflows, while funds that mainly hold safe-haven U.S. Treasuries attracted a small $200 million in new cash.
The yield on 10-year U.S. Treasury notes fell just 2 basis points to 2.86 percent throughout the week after economic data on U.S. housing starts, industrial output, and inflation came in as expected. Bond yields move inversely to their prices.
The latest inflows follow bond outflows of $91 billion in 2013 after Federal Reserve Chairman Ben Bernanke signaled last May that the Fed would begin reducing its bond-buying stimulus program, resulting in price losses on bonds and withdrawals from bond funds.
"As we enter 2014, the bond market is oversold," said Lewis of Samson Capital. "I think rebalancing is natural."
(Reporting by Sam Forgione; Editing by Chizu Nomiyama and Bernadette Baum)