October 19, 2017 / 11:17 PM / in a year

UPDATE 1-U.S. fund investors regain risk appetite as Dow breaches 23,000

 (Adds details on mutual funds and ETFs, investor quotes, table,
    By Trevor Hunnicutt
    NEW YORK, Oct 19 (Reuters) - U.S. fund investors regained an
appetite for risk over the last week, rushing into U.S. and
emerging-market stocks, according to data on Thursday from
    Stock mutual funds and exchange-traded funds (ETFs) overall
attracted $5.4 billion in the week ended Oct. 18, while emerging
markets pulled in $2.3 billion, the most cash since March,
according to Thomson Reuters' Lipper research unit.     
    For equity ETFs, the SPDR S&P 500 and iShares Core
MSCI Emerging Markets contributed the two largest net
positive flows, attracting more than $4.6 billion and $1.4
billion in new cash respectively, Lipper said.
    Invesco Ltd Global Market Strategist Kristina Hooper
said economic growth was not enough to explain the stock gains.
The S&P 500 has delivered more than a 16 percent return
this year, including dividends, and some 350 percent since its
March 2009 lows, yet U.S. gross domestic product growth has been
averaging around 2 percent annually.
    "This is not explosive growth, and yet we have a stock
market that's moving higher largely based on expectations of
what's going to happen," said Hooper.
    U.S. President Donald Trump is looking to overhaul the
country's corporate tax system, a move that would be seen as a
positive for stocks.
    "I'm concerned in the U.S. that there's greater
vulnerability because stocks have been on a tear and a lot of it
has been based on sentiment as opposed to fundamentals," said
    Stocks have posted a string of record highs in recent weeks,
and the Dow closed above 23,000 for the first time on Wednesday.
    Paul Kim, director of ETF strategy at Principal Financial
Group Inc, said companies were using keen maneuvers to
boost profits even when sales growth was minimal. Companies were
reducing their outstanding shares using buybacks, he said,
pushing up profits as a percentage of a declining number of
    Domestic-focused stock funds pulled in $1 billion during the
week, the most since August. Non-domestic equity funds attracted
$4.3 billion, marking a fifth straight week of inflows.
    Swings between sectors continue to generate a powerful
undertow in otherwise tranquil markets. Healthcare and
biotechnology sector funds posted $382 billion in outflows
during the week, marking the category's largest withdrawals
since August, according to Lipper.
    A bipartisan deal to stabilize Obamacare by restoring
federal subsidies to health insurers picked up Republican
support in the Senate on Thursday, despite Trump's opposition,
but still faces an uphill battle.
    And the bullish mood on stocks did little to shake demand
for bonds. Taxable-bond funds took in $4 billion for the week,
according to Lipper, and the category has posted outflows just
three weeks this year. Low risk money-market funds took in $5.1
    But Treasury funds posted $391 million outflows, the most
withdrawn since July, and high-yield outflows of $450 million
marked the largest withdrawals since August, Lipper said.
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          5.354     0.08      6,514.294  12,171
 -Domestic Equities        1.045     0.02      4,450.565  8,671
 -Non-Domestic Equities    4.309     0.21      2,063.729  3,500
 All Taxable Bond Funds    4.037     0.16      2,587.628  6,053
 All Money Market Funds    5.101     0.20      2,596.165  1,067
 All Municipal Bond Funds  0.536     0.13      399.952    1,472
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Rosalba O'Brien)
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