US equity inflows drop amid rising treasury yields

January 03, 2025 (MLN): Inflows into U.S. equity funds fell sharply in the week through Jan 01, impacted by rising Treasury yields and year-end profit-taking, as Reuters reported.

There were also concerns about a slower pace of Federal Reserve rate reductions this year.

Data from LSEG Lipper indicated that U.S. equity funds received just $490 million worth of investments during the week, significantly smaller than the $20.46 billion in net purchases in the week before.

Last week, concerns over the outlook for mega-cap technology stocks increased as the U.S. 10-year Treasury yield climbed to 4.641%, its highest since May 2.

Despite impressive annual gains in 2024, with the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average rising 28.64%, 23.31%, and 12.88% respectively, all three indexes fell by over 1% this week.

The decline was driven by investors across sectors taking profits.

Investors bought U.S. large-cap and multi-cap funds of $5.43bn and $844mn, respectively, but in contrast, pulled $1.67bn and $485mn, respectively out of small-cap and mid-cap funds.

Sectoral funds witnessed a fifth successive week of outflow, valued at a net 2.55 billion. Industrials, tech, and healthcare sectors, with $519mn, $385mn, and $358mn in net selling, led outflows.

Concurrently, investors added a robust $54.59bn worth of safer money market funds, the largest weekly net purchase in four weeks.

U.S. bond funds were under selling pressure for a third consecutive week, with investors divesting a net $493mn worth of these funds.

U.S. short-to-intermediate government & treasury funds segment, however, bucked the trend as it gained a net $1.35bn worth of inflows, the highest in three months.

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