U.S. equity funds see outflows on rate cut views

(Reuters) – U.S. equity funds witnessed outflows in the week to Oct. 9 as investors booked profits due to a shift in market expectations about the Federal Reserve rate cut path and a surge in bond yields.

According to LSEG data, investors sold a net $342 million worth of U.S. equity funds during the week following a net $30.86 billion worth of purchases in the previous week.

Investors pared back expectations on future Fed rate cuts last week following a stronger-than-expected U.S. nonfarm payrolls report for the last month.

The benchmark 10-year U.S. Treasury yield reached a 2-1/2 month high of 4.12% on Thursday, tempering earnings expectations for large-cap growth stocks.

Investors divested U.S. large-cap funds of a net $4.25 billion, in contrast to $35.47 billion in net purchases, a week ago. They also ditched mid-cap funds of $919 million but scooped up multi-cap and small-cap funds of $197 million and $118 million, respectively.

Sectoral equity funds, however, witnessed inflows worth $730 million, with tech, and metals and mining drawing a notable $639 million and $251 million, respectively.

U.S. bond funds, meanwhile, garnered a 19th weekly inflow in a row, valued at about $3.37 billion on a net basis.

Short-to-intermediate investment-grade funds attracted a significant $1.5 billion, the fourth consecutive weekly inflow. U.S. investors also bought general domestic taxable and loan participation funds worth a net $1.06 billion and $682 million, respectively.

At the same time, money market funds saw a net $2.54 billion worth of investments, the third successive weekly net purchase.