March 22, 2018 / 9:54 PM / a month ago

Investors pull $9.6 billion from U.S. equity funds, deepening selloff

NEW YORK (Reuters) - U.S. fund investors stripped billions from stocks during the most recent week, Lipper data showed on Thursday, adding to the selling pressure building on markets.

More than $9.6 billion cascaded out of U.S.-based equity funds during the week ended March 21, the Thomson Reuters research service said, just one week after those products took in $20 billion, illustrating the unstable mood gripping investors.

Stocks slumped on Thursday as President Donald Trump’s move to impose tariffs on up to $60 billion of Chinese imports drove fears about the impact on the global economy and fueled the biggest percentage declines in Wall Street’s three major indexes since they entered correction territory six weeks ago.

Markets have been whipsawed in a give-and-take this year marked by shifts from excitement over signs of economic growth to hand-wringing over higher inflation and yields. Just a week ago, Lipper reported that technology sector stock funds took in the most cash since the mania of the year 2000.

The market “goes up on good economic news, it goes down on higher rate news,” said Jim Paulsen, chief investment strategist at the Leuthold Group LLC. “It’s going nowhere fast.”

In the most recent week, it was negative developments that seemed to gain traction with investors.

Domestic stock funds posted $13 billion in withdrawals, offset a bit by continued demand for shares outside the country, but still the largest outflows since the first seven days of February when market conditions worsened.

The most recent week’s flows were also influenced by unusual trading patterns as investors unwound positions in futures and options contracts that expired on Friday, a phenomenon known as “quadruple-witching.”

Volatility is nonetheless perking up activity in exchange-traded funds (ETFs). Nearly 2.5 trillion euros in ETFs changed hands globally in February ($3 trillion), according to Flow Traders NV, the most on records dating to 2015.

RISING RATES

High-yield “junk” bond funds and financial sector funds posted their largest withdrawals in five weeks during the latest period, while precious metals commodities funds collected their fifth straight week of inflows.

Stock sectors sensitive to rising rates got a respite as the U.S. Federal Reserve signaled just two more rate hikes in 2018.

Utilities funds took in $311 million, the most since June 2017, while real estate sector products pulled in $196 million, the most cash since January.

Overall, bond funds took in $3.2 billion during the week, Lipper data showed.

Reporting by Trevor Hunnicutt, additional reporting by Sinead Carew; editing by Jennifer Ablan and Cynthia Osterman

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