Investors in funds based in the United States poured $8.9 billion into stock funds in the latest week, the most in nine weeks as the S&P 500 continued to hit new record highs, data from Thomson Reuters' Lipper service showed on Thursday.
Mutual funds that hold stocks pulled in about $3.07 billion in the week ended May 15 - the most in eight weeks - while stock exchange-traded funds attracted over $5.8 billion, or slightly less than the prior week. The SPDR S&P 500 ETF, however, gained a sizeable $5.4 billion in new cash.
"The momentum of the market and the steadiness of large caps gets people interested in investing again," said Jeff Tjornehoj, head of Americas research at Lipper, on the surge in new cash into stock funds amid price gains on stocks such as Google Inc, Bank of America Corp, and Citigroup Inc.
The expectation of continued accommodative monetary policy from central banks globally has also sustained support for stocks. The appetite, or lack thereof, for equities serves as an important barometer of investor confidence and how people feel about the state of economic growth.
The total inflows into stock funds was up over $1 billion from the prior week. Tjornehoj said mom-and-pop investors put greater faith in stocks over the latest week as the S&P 500 rose an additional 1.6 percent. The index is up nearly 16 percent this year.
Even as the S&P 500's weekly gain overshadowed the MSCI all-country world equity index's rise of 0.3 percent, funds that hold stocks outside of the United States attracted more cash than funds that hold U.S. stocks in the latest week.
Funds that hold non-U.S. stocks raked in about $4.6 billion, while funds that hold U.S. stocks attracted over $4.3 billion. Investors tempered commitments of $5.4 billion to the SPDR S&P 500 ETF with outflows of about $1.45 billion from the iShares Russell 2000 ETF, which tracks stocks of smaller U.S. companies. Investors also pulled $1.1 billion out of the SPDR Gold Trust.
ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor.
Among the renewed appetite for international stocks - which was the greatest since mid-January - Japanese stock funds pulled in $1.57 billion in new cash, the second highest on record after the funds reaped record gains of $1.67 billion in mid-April.
The enthusiasm for Japanese stocks came as Japan's Nikkei average broke above 15,000 for the first time since January 2008 on Wednesday. The index has surged 45 percent this year, boosted by the Bank of Japan's announcement on April 4 that it would inject $1.4 trillion into the nation's economy in less than two years to fight deflation.
Demand for bond funds, meanwhile, paled in comparison to demand for stock funds. Just $2.83 billion flowed into taxable bond mutual funds and ETFs over Lipper's reporting period, a sharp drop from the prior week's record $8.88 billion in cash gains. The latest period was the weakest turnout since early April.
Investors pulled $402.8 million out of high-yield "junk" bond funds after the Barclays U.S. Corporate High Yield Index hit a record low yield-to-worst of 4.97 percent on May 7. Investors had put $789 million into the funds the previous week.
"It's certainly a number that troubles you as a fixed income investor," said Tjornehoj on the low yield on the high-yield bond index. He said investors may be growing concerned as to whether they are receiving enough of an interest payout on high-yield bonds for the risk.
Investors soured on ETFs that hold taxable bonds and pulled $287 million out of the funds after pouring a record $4.49 billion into the funds the prior week. Demand also fell sharply for funds that hold U.S. Treasuries, which attracted just $73 million after gaining record high inflows of $1.45 billion the prior week.
Investment-grade corporate bond funds also saw a drop in demand to $1.29 billion in inflows, down from big gains of $3.7 billion the prior week. Funds that hold leveraged loans, which are protected from rising interest rates by being pegged to floating-rate benchmarks, took in about $871 million, down from over $1 billion the prior week.
The yield on the 10-year Treasury fell slightly to 1.95 percent at the close of trading on Wednesday.
_0">The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.
_1">(Reporting by Sam Forgione; Editing by Lisa Shumaker)
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