Investors turn net sellers of U.S. equity funds on slowdown worries

Traders work on the floor of the NYSE in New York

(Reuters) – U.S. investors turned net sellers of equity funds in the week ended June 29, as they fretted over the impact of hefty rate increases on the U.S. economy, with data showing a contraction in the first quarter.

According to Refinitiv Lipper data, investors jettisoned U.S. equity funds worth $3.78 billion after purchases of $11.17 billion in the previous week.

Fund flows: US equities, bonds and money market funds

Federal Reserve chair Jerome Powell said on Wednesday there was a risk that interest rate increases will slow the economy too much, but persistent inflation was the bigger worry.

The U.S. economy contracted slightly more than previously estimated in the first quarter as trade deficit widened to a record high and a resurgence in COVID-19 infections curbed spending on services including recreation.

U.S. growth and value funds recorded outflows worth $1.07 billion and $853 million, respectively.

Fund flows: US growth and value funds

U.S. investors sold health care funds worth $637 million, the most since Nov 24. Utilities, financials and tech sector funds also posted outflows of $489 million, $416 million and $378 million, respectively.

Fund flows: US equity sector funds

U.S. bond funds saw net selling for a fourth straight week worth $8.58 billion, although outflows eased 28% from the previous week.

Investors exited U.S. taxable bond funds worth $7.44 billion and $1.61 billion in municipal bond funds in their fourth straight week of net selling.

Fund flows: US bond funds

U.S. short/intermediate investment-grade and domestic taxable fixed income funds faced outflows of $4.28 billion and $2.46 billion, respectively, but short/intermediate government and treasury funds attracted $1.24 billion in inflows.

Outflows in U.S. money market funds continued for a third week, with investors exiting $14.95 billion in funds.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Vinay Dwivedi)