May 2, 2018 / 4:27 PM / 9 months ago

Wary U.S. fund investors pull back from domestic stocks -ICI

    By Trevor Hunnicutt
    NEW YORK, May 2 (Reuters) - U.S. fund investors backed off
domestic stocks for a second straight week, greeting strong
earnings with a shrug and fretting about the potential for a
downturn, Investment Company Institute (ICI) data showed on
    Domestic stock fund demand weakened, with investors pulling
$3.8 billion out during the seven days through April 25,
according to the trade group.
    First-quarter S&P 500 earnings are now expected to
leap 25 percent over the prior year, according to Thomson
Reuters I/B/E/S, with more than two-thirds of those companies
having reported results.
    Nearly 80 percent of the companies have beaten expectations,
the most on records dating to 1994.
    Credit Suisse Group AG analysts led by Jonathan
Golub said this kind of earnings growth is unheard of during the
later stages of an economic recovery. U.S. stocks have been
rising for the better part of a decade.
    Yet concerns about economic growth peaking, rising inflation
and interest rates and a flattening yield curve are weighing on
stocks, along with the potential for greater regulation of
technology companies.
    "While each issue has merit, we believe investors are
under-estimating the market's potential upside, and
over-estimating risks," the analysts wrote in a note on
    Investors continued to turn to international equities and
debt markets for relative safety despite the risk that stalling
growth and rising rates could wreak havoc on those assets, too. 
    The benchmark U.S. 10-year Treasury yield inched
through the 3 percent level for the first time in four years on
April 24, pushing bond prices down, and on the same day
Caterpillar Inc's strong earnings were overshadowed by
comments by an executive for the world's largest heavy equipment
maker that the profits are "the high watermark for the year."
    International-focused equity funds gathered $2.9 billion
during the most recent week, marking nearly 17 months without
withdrawals. Bond funds took in $2.3 billion, a tenth straight
week netting cash, ICI said.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
               4/25    4/18    4/11    4/4     3/28/2018
 Equity        -879    -252    5,213   -4,501  -11,674
    Domestic   -3,777  -2,377  3,775   -6,018  -12,377
    World      2,898   2,125   1,437   1,517   703
 Hybrid        -631    -1,089  -1,099  -930    -1,314
 Bond          2,278   8,492   6,470   2,943   263
    Taxable    2,338   9,321   7,166   3,053   136
    Municipal  -60     -830    -696    -110    126
 Commodity     508     167     1,120   547     -332
 Total         1,276   7,318   11,704  -1,941  -13,057
 (Reporting by Trevor Hunnicutt
Editing by Tom Brown)
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