by Pat Keon, CFA.
The Dow Jones Industrial Average closed the fund-flows week ended Wednesday, July 16, at a record high of 17,138.20. This record close was the Dow’s fifteenth for the year to date and was the result of a gain of 0.9% (152.59 points) for the five trading sessions.
The market’s performance was spurred on by better-than-expected corporate earnings and merger-and-acquisition news. Among those posting better-than-expected results were financial heavyweights J.P. Morgan Chase, Goldman Sachs, and Citigroup. Citigroup’s earnings report came on the heels of the news of its $7-billion settlement with the U.S. Justice Department over its questionable mortgage-backed securities practices prior to the 2008 financial crisis. Deal news that sparked trading included Mylan Inc.’s announcing plans to buy part of Abbott Labs and Time Warner’s rejecting 21st Century Fox’s $80-billion offer.
Overall, the week’s trading activity resulted in $2.6 billion of net outflows from funds, which broke a streak of three consecutive weeks of net inflows. Accounting for all of the net outflows were money market funds, which had $9.0 billion leave their coffers. The outflows from money market funds reversed a three-week trend of net inflows that had totaled $25.5 billion.
For the week taxable bond funds took in $1.9 billion net. Taxable bond mutual funds had $2.6 billion of positive flows, marking their twenty-eighth consecutive week of net inflows. Taxable bond exchange-traded funds (ETFs) had $588 million leave their coffers, for their sixth straight week of net outflows. Mutual funds in Lipper’s investment-grade bond funds classifications brought in over $1 billion net for the week. ETF investors sold off PIMCO 0-5 Year High Yield Corporate Bond Index (HYS, -$516 million) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$386 million).
Equity funds also experienced positive flows for the week, growing their coffers by $4.3 billion. The positive net flows came from equity ETFs (+$4.4 billion), while equity mutual funds had net outflows of $70 million. SPDR S&P 500 (SPY, +$4.1 billion) accounted for the lion’s share of the net inflows for equity ETFs.
Municipal bond funds had positive net flows of $158 million for the week. The majority of the net inflows came from the mutual funds side (+$114 million), while municipal bond ETFs had positive net flows of $44 million.