NEW YORK (Reuters) – Investors in U.S.-based mutual funds committed $5.4 billion to stock funds in the latest week on signals that the Federal Reserve would maintain its bond buying for some time, data from the Investment Company Institute showed on Wednesday.
The inflows in the week ended November 20 marked the sixth straight week in which investors have poured new cash into stock funds, according to data from ICI, a U.S. mutual fund trade organization.
Funds that mainly hold stocks of companies outside the U.S. attracted $4.39 billion, marking the biggest weekly inflows into those funds since February. Funds that mainly hold U.S. stocks, meanwhile, attracted $1 billion, marking their weakest showing in five weeks.
While U.S. stocks hit record highs over the weekly period, global stocks outperformed. MSCI’s world equity index rose 1 percent, while the Standard & Poor’s 500 stock index fell a slight 0.04 percent over the period in response to dips later in the week.
Fed Vice Chair Janet Yellen, who is President Barack Obama’s nominee to succeed Ben Bernanke as chairman of the Fed, defended the U.S. central bank’s steps to spur economic growth during a November 14 Senate hearing on her nomination.
Yellen’s comments lifted global stock markets, but U.S. stocks retreated at the end of the reporting period after minutes from a Fed policy meeting in October suggested it could begin to scale back its $85 billion in monthly bond buying at one of its “next few meetings.”
The Fed’s stimulus has kept bond interest rates low, leading investors to seek higher income in stocks and helping boost the S&P 500 over 26 percent this year.
Investors pulled $3.2 billion out of bond funds, marking the eighth straight week of investor withdrawals. The latest outflows were the smallest, however, in four weeks.
Hybrid funds, which can invest in stocks and fixed income securities, attracted $1.4 billion in new cash over the latest weekly period, down slightly from the previous week.
Investors have poured billions into stock funds every month this year through October to capitalize on the rally in U.S. stocks while souring on bond funds in recent months on fears over the Fed’s next policy move, ICI data show.
In October, investors poured $21.1 billion into stock funds, trouncing inflows of $2.6 billion in September and marking the biggest monthly inflows since January, according to ICI data released Tuesday.
Funds that specialize in non-U.S. stocks attracted greater demand with inflows of $13 billion over the month, while funds that mainly hold U.S. stocks regained popularity with inflows of $8.1 billion, marking their first inflows in three months.
The inflows into stock funds last month came ahead of the Fed’s decision to maintain the pace of its bond-buying program on October 30.
Bond funds had outflows of $15.6 billion in October, their fifth straight month of investor withdrawals. Investors have continued to pull cash out of bond funds in anticipation of a spike higher in interest rates once the Fed begins scaling back its bond-buying.
Recent polls by Reuters indicate a majority of economists and financial market analysts do not expect a pullback to begin until the first quarter of next year.
(Reporting by Sam Forgione- Editing by Leslie Gevirtz)
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