October 27, 2017 / 12:42 AM / a year ago

UPDATE 1-Volatility fails to scare investors in U.S. stock, bond funds -Lipper

 (Adds details on ETFs and mutual funds, analyst quote, table,
    By Trevor Hunnicutt
    NEW YORK, Oct 26 (Reuters) - Investors endured jolts to both
stocks and bonds, pouring even more cash into funds tracking
both markets during the latest week, according to Lipper data
released on Thursday.
    U.S.-based stock funds pulled in $4.7 billion and
taxable-bond funds attracted $3.7 billion during the week ended
Oct. 25, according to the research service.
    Rates on U.S. government debt and U.S. stock volatility both
spiked in recent days as corporations reported third-quarter
earnings, speculation swirled over who will lead the Federal
Reserve and debate over a tax plan in Washington.
    The CBOE Volatility Index, an options-market gauge of
expected price swings, rose as high as 13.24 during trading this
week, the most since early September. And yields on the 10-year
U.S. Treasury note leapt to 2.45 on Thursday from
2.06 in early September. Bond yields move inversely to their
    The moves in both debt and equities added a frisson to
calm-trading markets. Yet fund investors continued to put cash
in stock and taxable-bond funds, despite the average fund in
both category losing value during for the week, according to
    Tom Roseen, head of research services for Thomson Reuters'
Lipper unit, said many mom-and-pop investors remain concerned
about lofty equity valuations and are keeping money in
high-yielding debt funds.
    But he said stock investors are seeing strong corporate
profits validating double-digit year-to-date price gains. Nearly
three quarters of the S&P 500 companies that have already
disclosed third-quarter earnings reported profits surpassing
analyst expectations, according to Thomson Reuters I/B/E/S. The
index has gained 16 percent so far this year, including
    "People pretty much kept the pedal to the medal," said
Roseen. "How much longer can we go up? We need a pullback. We
need a breather."
    Domestic-focused stock funds pulled in $2.2 billion, the
most since August. That included a $706 million inflow for funds
focused on the finance sector, the data showed. Banks and
insurers are seen increasing their earnings as rates rise.
    Lipper said funds focused on Japanese stocks attracted $365
million, the most since June, as Prime Minister Shinzo Abe's
ruling bloc scored a big win in Sunday's election. Abe is
expected to press growth-oriented policies, including a plan to
push businesses to use their huge cash-piles to boost
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          4.695     0.07      6,241.036  12,129
 -Domestic Equities        2.219     0.05      4,189.214  8,639
 -Non-Domestic Equities    2.476     0.12      2,051.823  3,490
 All Taxable Bond Funds    3.731     0.14      2,588.397  6,074
 All Money Market Funds    3.123     0.12      2,599.980  1,070
 All Municipal Bond Funds  0.262     0.07      399.171    1,470
 (Reporting by Trevor Hunnicutt; editing by Grant McCool)
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