By Sam Forgione NEW YORK, Jan 17 Investors in U.S.-based funds pumped $3.75 billion into stock mutual funds in the latest week, a continuation of the prior week's massive inflow and suggesting a trend of retail investors putting money back to work in the stock market, data from Thomson Reuters' Lipper service showed on Thursday. The new sum, which spans the week ended Jan. 16, is roughly half the previous week's huge inflow of $7.53 billion into stock mutual funds, which was the most new cash since 2001. The two sums combined, however, amount to $11.3 billion, which is the biggest two-week gain since April 2000, Lipper analyst Matthew Lemieux said. Bond funds, meanwhile, attracted $4.63 billion in net new cash. Bond mutual funds raked in $4.21 billion of that sum, which was modestly less than the previous week's strong inflows of $5.45 billion. Bond ETFs regained some favor with inflows of $417.82 million after investors pulled $1.21 billion out of the funds the previous week. The big inflows into stock mutual funds mark a reversal in sentiment from last year, when investors pulled a total of $129 billion out of the funds while pouring $258 billion into bond mutual funds. "It's definitely a good indicator for investors going back into equities," said Lemieux on the inflows into equity mutual funds in the past two weeks. "The combined direction of the two weeks may indicate that this shift back towards equity mutual funds may have some legs," he added. The enthusiasm for stock mutual funds did not apply to stock ETFs, which suffered outflows of $3.5 billion. The outflows are the first losses for the funds in eight weeks, and mark a reversal from the previous week's big gains of $10.78 billion. Investors turned particularly cold toward the SPDR S&P 500 ETF fund, from which they pulled $4.21 billion. ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor. Lemieux of Lipper said that institutional investors may have taken profits from the passive stock ETFs and instead opted to invest more actively. When combined, the sizeable inflows into stock mutual funds and the big outflows from stock ETFs produce a total figure of just $286 million into equity funds overall, which is sharply lower than the previous week's total inflow of $18.32 billion, which was the most net new cash into equity funds since 2008. The S&P 500 rose a slight 0.8 percent over the reporting period. Federal Reserve Presidents James Bullard, Charles Plosser and Charles Evans voiced their optimism about U.S. growth for 2013, while upbeat U.S. retail sales for December and strong corporate earnings for major banks JPMorgan Chase and Goldman Sachs also boosted markets. Investors remained cautious, however, in light of Republican opposition in Congress to increase the $16.4 trillion U.S. debt ceiling. A failure to raise the government's borrowing limit could cause the United States to default on its debt in coming months. With regard to the $3.75 billion inflow into stock mutual funds, those that specialize in U.S. stocks attracted $1.41 billion of that sum, while mutual funds that hold international stocks attracted the remaining $2.34 billion. Investors in bond funds favored higher quality and gave $2.02 billion to investment-grade corporate bond funds. The figure represents the total amount pumped into both mutual funds and ETFs that hold investment-grade bonds. Lemieux of Lipper said that consistent inflows into investment-grade corporate bond funds show that investors are still opting for some safety. High-yield "junk" bond funds attracted just $571 million overall, indicating the decreased appetite for risky bonds compared with the previous week, when the funds attracted $1.11 billion in new cash. Investors also sought flexible funds, which can invest in a wide range of securities including both stocks and bonds worldwide, and pumped $1.47 billion into the funds. That is the most since August of last year. 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 0.286 0.01 3,042.918 10,145 Domestic Equities -4.181 -0.19 2,255.468 7,523 Non-Domestic Equities 4.467 0.57 787.450 2,622 All Taxable Bond Funds 4.625 0.30 1,531.942 4,824 All Money Market Funds -9.603 -0.40 2,402.327 1,363 All Municipal Bond Funds 1.443 0.45 324.824 1,348
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