Weekly U.S. stock fund flows deteriorate, lowest since April: ICI

July 12, 2017 2:41 PM EDT

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, NY, U.S. May 18, 2017. REUTERS/Brendan McDermid

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By Trevor Hunnicutt

NEW YORK (Reuters) - Investors pulled $11.6 billion from domestic U.S. stock funds during the latest week, the most cash to flee the funds in three months, according to Investment Company Institute (ICI) data on Wednesday.

The domestic stock fund withdrawals during the week ended July 5 were the largest since early April. That turned overall mutual fund and exchange-traded fund flows negative for only the second time this year and the first time since January, the trade group said.

David Lafferty, chief market strategist at Natixis Global Asset Management, said U.S. stocks were expensive and investors were no longer willing to "bet the farm" on further gains.

"It's frustrating for investors right now," said Lafferty, noting that stock market volatility measured by indexes such as the CBOE Volatility Index remained below its historical average even as monetary policymakers plan to withdraw unprecedented levels of stimulus.

"Everybody seems to know the world is risky, but the market is telling them it's not risky."

During the week, U.S. bond yields rose as more hawkish comments from central bankers signaled an end to ultra-loose monetary policy in Europe and the United States. Bond prices fall as their yields rise.

Still, nearly $5.1 billion moved into world stock funds and $6.1 billion pivoted into taxable bond funds, marking a 31st straight week of inflows for both categories, according to ICI.

Municipal bond funds recorded $250 million in outflows, their first week of withdrawals since March, the trade group said. Investors pulled $583 million from commodity funds, including those invested in gold. Rising bond yields reduce demand for precious metals, which pay no interest.

(Reporting by Trevor Hunnicutt; Editing by Bernadette Baum)

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