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U.S.-based stock funds attract $11.8 billion in latest week - Lipper

By Sam Forgione

NEW YORK, Oct 31 (Reuters) - Investors in funds based in the

United States poured $11.8 billion into stock funds in the

latest week on expectations the Federal Reserve would stick with

its current bond-buying program, data from Thomson Reuters'

Lipper service showed on Thursday.

"There is a lot of uncertainty gone," said Jeff Tjornehoj,

head of Americas research at Lipper."People feel confident that

bond-buying will keep asset prices elevated," he said.

The new demand in the week ended Oct. 30 marked the third

straight week of big inflows into stock funds. U.S. stocks have

surged to record highs within the past two weeks on bets that

the Fed would maintain its $85 billion in monthly bond-buying at

its October meeting.

In line with expectations, the central bank extended its

bond-buying support on Wednesday, but issued a slightly

less-dovish-than-expected statement, leading to a dip in global

markets and Treasury bond prices.

The Fed dropped a reference to a "tightening of financial

conditions observed in recent months" from its list of risks to

the outlook and removed a mention of concern over higher

mortgage rates, which have fallen since the last meeting.

Despite the stock market dip at the end of the week, funds

that hold U.S. stocks attracted $8 billion as the Standard &

Poor's 500 index rallied 1 percent over the weekly


Funds that hold international stocks, meanwhile, attracted

about $3.5 billion, marking the eighth straight week of new cash

into the funds. MSCI's world equity index rose

0.7 percent over the weekly period.

Funds that hold emerging market stocks attracted $1.2

billion in new cash, marking their biggest inflows in five

weeks. MSCI's emerging market equities index rose 0.9

percent over the period.

Emerging market assets have benefited from the Fed's easy

money policies. Tjornehoj said the demand stemmed from the

expectations of continued Fed stimulus.

Investors pulled about $60 million out of Japanese stock

funds, however, reversing inflows of $373 million the previous

week. Japan's Nikkei stock average suffered its biggest

one-day loss in 2-1/2 months on Oct. 25, hit by the yen's

strength against the dollar.

Money market funds attracted $7.7 billion in new cash, down

from massive inflows of $43.8 billion in the previous week.

Institutional investors poured $14.1 billion into the funds,

while retail investors withdrew nearly $6.4 billion.

Tjornehoj said that institutional investors may have still

parked cash in the funds on a looming suspicion that the U.S.

stock market has hit a peak. The S&P 500 index has risen over 23

percent this year.

Investors had poured cash into the funds, which hold

low-risk assets such as short-dated government bonds, over the

previous week after the threat of a U.S. debt default faded.

Taxable bond funds also reaped $1.3 billion in inflows, down

from the previous week's inflows of $3.1 billion but still

marking two consecutive weeks of demand following three prior

weeks of outflows.

Investors gave $752.7 million to high-yield junk bond funds,

marking the eighth straight week of demand for the funds. The

funds tend to attract new cash alongside stock funds since they

are viewed as riskier than other debt classes.

"There wasn't much to be excited about with the economy, and

strangely enough that was good news for bonds," Tjornehoj said.

Weak U.S. jobs data on Oct. 22 have fueled speculation that the

Fed would keep its accommodative monetary policy in place.

The yield on the benchmark 10-year U.S. Treasury rose just 4

basis points over the period and ended the week at 2.53 percent.

That marked only a modest change from the prior week, when the

yield fell to 2.47 percent, its lowest in three months. Bond

yields move inversely to their prices.

Commodities and precious metals funds, which mainly invest

in gold futures, had outflows of $296 million, marking the fifth

straight week of withdrawals from the funds. The SPDR Gold Trust

ETF had the biggest withdrawals of $274.6 million.

The price of spot gold flattened late in the week. Gold

was up less than 0.1 percent at $1,344.56 an ounce at the

close of trading on Oct. 30.

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 11.767 0.32 3,747.512 10,341

Domestic Equities 7.998 0.29 2,782.543 7,629

Non-Domestic Equities 3.769 0.39 964.969 2,712

All Taxable Bond Funds 1.302 0.08 1,624.785 5,151

All Money Market Funds 7.665 0.33 2,352.683 1,285

All Municipal Bond -0.503 -0.18 281.469 1,402