May 24, 2018 / 11:12 PM / 2 months ago

UPDATE 1-U.S. fund investors hunker down in domestic stocks

 (Adds details on funds, analyst quote, table, byline)
    By Trevor Hunnicutt
    NEW YORK, May 24 (Reuters) - U.S. fund investors streamed
into U.S. stocks for a second straight week, according to Lipper
data on Thursday, betting that domestic equities can dodge the
threat of a retaliatory trade war and economic-slowdown risks.
    Equity mutual funds and exchange-traded funds (ETFs) took in
$3.7 billion during the seven-day stretch that ended May 23,
while their taxable-bond counterparts attracted $3.1 billion,
the research service said. Nine in 10 dollars that went into
stocks moved into funds primarily invested within the United
States.
    The inflows into stocks and bonds supported a market being
blown many different directions by rising rates, trade conflict
and other geopolitical crosscurrents even as corporate earnings
strengthen.
    "I was pretty amazed by the numbers," said Tom Roseen, head
of research services for Thomson Reuters' Lipper unit, noting
the rise since April in both oil prices and U.S. bond yields,
though both assets have eased a bit off their highs.
    "We still have headwinds as far as global markets go and
that could dampen global growth."
    Small-cap funds, seen as less influenced by global economic
factors as by domestic demand and corporate tax cuts, pulled in
$2.6 billion, the most since April 2017.
    Global equities in 47 countries measured by MSCI Inc
 have returned just over 1 percent this year as the U.S.
feuds with China over trade and North Korea over nuclear
weapons.
    Emerging market currencies sank on economic concerns in
Argentina and Turkey, while Italian government bond yields
soared on fears the government could shred euro zone unity.
    Softening the blow, Roseen said, were notes from the U.S.
Federal Reserve's May 1-2 meeting released on Wednesday that
showed policymakers were still ready to raise rates but seeing
limited signs that inflation has already gotten out of hand.

    The march higher in yields, which pushes bond prices lower,
has done little to hurt demand for funds invested in those
bonds. Corporate investment-grade debt funds, for instance, took
in their 11th straight week of cash.
    Higher yields did help bank sector funds pull in $330
million, while debt-sensitive real estate sector funds posted
$334 million in withdrawals.
    Strong oil prices helped energy stock funds draw $560
million in new cash, the most since January. And healthcare
funds posted $533 million just one week after their largest
inflows of the year after a policy speech by U.S. President
Donald Trump on drug prices.
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          3.666     0.05      7,461.469  12,318
 Domestic Equities         3.371     0.07      5,168.998  8,770
 Non-Domestic Equities     0.296     0.01      2,292.471  3,548
 All Taxable Bond Funds    3.057     0.11      2,776.305  6,066
 All Money Market Funds    2.967     0.11      2,693.895  1,041
 All Municipal Bond Funds  0.233     0.05      427.735    1,485
 
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Cynthia Osterman)
  
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