U.S. Investors Increase Equity Fund Purchases

(Reuters) – U.S. investors purchased equity funds for the fifth consecutive week through Nov. 4, driven by a rally in Wall Street's main indexes, optimism for strong economic growth, and expectations of a third consecutive Federal Reserve rate cut this month.

According to LSEG data, investors acquired U.S. equity funds worth $8.85 billion on a net basis during the week, following approximately $11.8 billion in net purchases the previous week.

U.S. economic activity has seen slight expansion in most regions since early October, as reported by the Fed earlier this week.

Market participants are also preparing for a potential rate cut later this month, with the CME Fed Watch tool indicating a 66.7% likelihood of a quarter-point reduction.

The upcoming monthly payrolls report, due later on Friday, could influence the Fed's decision.

U.S. large-cap funds attracted $6.6 billion in inflows, marking the largest increase in three weeks. Small-cap and multi-cap funds also saw net inflows of $2.59 billion and $585 million, respectively.

Conversely, U.S. sectoral funds faced a net outflow of $321 million, following three consecutive weeks of inflows. Notably, tech and healthcare sector funds were offloaded, amounting to $914 million and $538 million, respectively.

In the bond market, weekly net purchases in U.S. bond funds dropped to a six-week low of $3.7 billion for the week. However, short-to-intermediate investment-grade, general domestic taxable fixed income, and municipal debt funds still garnered significant inflows of $2.01 billion, $1.36 billion, and $1.15 billion, respectively.

Additionally, investors channeled a substantial $121.34 billion into U.S. money market funds, marking the largest single-week amount since April 2020.