February 9, 2018 / 12:47 AM / a year ago

UPDATE 1-Investors withdraw record $23.9 bln from U.S.-based stock funds -Lipper

 (Adds details on funds, analyst quote, table, byline)
    By Trevor Hunnicutt
    NEW YORK, Feb 8 (Reuters) - U.S. fund investors sucked $23.9
billion out of the stock market during the latest week, marking
the largest withdrawals from those funds on record, Lipper data
showed on Thursday, as the benchmark S&P 500 and Dow Jones
Industrials indexes sank further from their record highs.
    The withdrawals from U.S.-based equity exchange-traded funds
(ETFs) and mutual funds took place during the week ended Feb. 7,
according to the research service, whose records date back to
    "We're seeing a flight to safety here, money leaving
equities, a lot of money going to money markets," cash-like
investments that took in $30.8 billion during the week, said Pat
Keon, senior research analyst for Thomson Reuters' Lipper unit.
    "The market's overbought. It's due for a correction and
looking for a reason, and I think it kind of found it with
this," he said.
    The Dow plunged more than 1,000 points on Thursday.
That represented a full market correction, defined as a 10
percent drop from the 52-week high. The S&P 500 <.SPX    >
dropped 3.7 percent to a new low for the week.
    The declines followed a catalyst that, at first, seemed
positive: U.S. wages increased at their largest annual pace in
more than 8-1/2 years, data showed last Friday.
    But rising wages could crimp corporate profits and push up
inflationary pressures, forcing the U.S. Federal Reserve to
raise interest rates and tighten economic conditions faster than
    That possibility along with rising rates gave markets an
excuse to pause a long run-up that pushed the S&P 500 up some 20
percent in 2017 and almost another 8 percent in the first 18
days of the new year alone.
    Keon cautioned that the withdrawal figures for the week were
boosted by ETFs, which are often used by fast-trading
institutional investors.
    Stock ETF outflows were $21 billion, compared with modest
mutual fund withdrawals of $3 billion, according to Lipper. By
comparison, those mutual funds lost $236 billion for the week
just from negative performance.
    Still, there were signs of excess. Just last month,
U.S.-based domestic equity funds took in the most cash since
July 2013. Two weeks ago, U.S. technology stock funds took in
more cash than in any week since the turn-of-the-century dot.com
bubble. Last week, five products that essentially
bet on market calm by shorting the CBOE Volatility Index
took in the most money ever.
    Technology stock funds' $1.1 billion outflow during the most
recent week marked the largest withdrawals since September 2016.
And short-volatility products sank so much on Monday that at
least two are closing for good.
    Non-domestic stocks, including in emerging markets, and
bonds were among safe havens chosen by investors. Financial
sector funds, which are seen profiting from rising rates by
boosting lending, took in $861 million.
    Bonds attracted money overall despite their negative
performance during the week. Treasury fund inflows of $2 billion
were the largest since September, Lipper said, though high-yield
junk fund outflows rose to $2.7 billion. Demand for those
lower-quality bonds often moves in sympathy with equities.
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -23.895   -0.33     6,807.397  12,167
 Domestic Equities         -28.004   -0.57     4,635.164  8,671
 Non-Domestic Equities     4.109     0.18      2,172.232  3,496
 All Taxable Bond Funds    3.112     0.12      2,629.007  6,049
 All Money Market Funds    30.815    1.17      2,665.631  1,019
 All Municipal Bond Funds  0.675     0.17      401.881    1,472
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Leslie Adler)
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