by Tom Roseen.
Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the sixth week in seven, injecting a net $3.8 billion for Refinitiv Lipper’s fund-flows week ended September 8, 2021. Fund investors were net purchasers of taxable bond funds (+$6.0 billion), tax-exempt fixed income funds (+$1.1 billion), and equity funds (+$1.1 billion) while being net redeemers of money market funds (-$4.4 billion) for the week.
After the release of a disappointing nonfarm payrolls report over the Labor Day shortened trading week, U.S. broad-based indices struggled during the fund-flows week. Despite the S&P 500 and the NASDAQ booking fresh closing highs at the beginning of the flows week, concerns about the COVID-19 delta variant, inflation, Fed tapering, government spending, taxes, and the federal budget pressured U.S. markets.
On the domestic side of the equation, the NASDAQ Composite Price Only Index (-0.15%) did the best job mitigating losses of the broadly followed U.S. indices for the fund-flows week as some investors continued to bid up mega-cap technology stocks. It was followed by the S&P 500 Price Only Index (-0.22%). The Dow Jones Industrial Average Price Only Index (-0.80%) witnessed the largest declines for the week. Overseas, the Nikkei 255 Price Only Index (+5.76%) witnessed the strongest plus-side returns of the often-followed broad-based international indices after Japan’s Prime Minister Yoshihide Suga, whose government has come under pressure due to its handling of the pandemic, said he will resign before this year’s national elections. The Xetra DAX Total Return Index (-1.70%) was the subgroup laggard.
On Thursday, September 2, 2021, the NASDAQ and S&P 500 ended in record territory for the day after the prior week’s first-time jobless claims declined by 14,000 to 340,000, showing a minor improvement ahead of the nonfarm payrolls report. In other economic news, July U.S. factory orders rose 0.4% outpacing analysts’ expectations of 0.3% as manufacturers increased efforts to meet the latest demand spike. For Q2, U.S. productivity was also on the rise at a revised 2.1% annual pace, slightly behind the 2.3% rise reported earlier. Near-month oil futures rose 1.4% on the day to close at $69.99/barrel (bbl).
U.S. stock indices closed mixed on Friday, September 3, after the Department of Labor reported the U.S. economy added just 235,000 jobs in August, far lower than the 720,000 forecasted by analysts. However, the unemployment rate declined to 5.2% from 5.4% in July, hitting a new pandemic low. While some investors viewed the report as a reason for the Federal Reserve to delay its long-anticipated plan to taper its asset purchases, others were concerned by the combination of a slowdown in hiring with a surge in wage growth—a worrisome combination for the economy. Even though the Institute of Supply Management’s August ISM service sector survey fell to 61.7 from a record 64.1 in July, it is still signaling strong growth.
The U.S. markets were closed on Monday, September 6, in observation of the Labor Day holiday. While U.S. stocks ended mostly lower on Tuesday, September 7, as investors assessed the possible impact of slowing economic growth because of the rise in the delta variant, the NASDAQ rose to record highs on the day as some investors kept a keen eye on mega-cap technology issues. The 10-year Treasury yield rose five basis points to close out the day at 1.38% as crude oil futures fell 0.8% to settle at $68.75/bbl.
On Wednesday, September 8, the Dow and S&P 500 ended lower for the third day in a row. The U.S. broad-based indices were weighed down by energy, materials, and information technology issues after investors learned that several U.S. banks cut their U.S. target growth rates as a result of the lower-than-expected nonfarm payroll figures and the Federal Reserve’s Beige Book showed economic growth slowed to a moderate pace in August. The 10-year Treasury yield declined three basis points on the day to close at 1.35%, while crude oil futures rose 1.4% to settle at $69.30/bbl.
Exchange-Traded Equity Funds
Equity ETFs witnessed their second week of net inflows in a row—attracting $3.8 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$3.5 billion), injecting money also for the second consecutive week. For the eleventh straight week, nondomestic equity ETFs witnessed net inflows, although attracting just $267 million this past week. SPDR S&P 500 ETF (SPY, +$3.9 billion) and iShares US Real Estate ETF (IYR, +$2.2 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 (QQQ, -$1.7 billion) experienced the largest individual net redemptions, and Financial Select Sector SPDR Fund (XLF, -$1.2 billion) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the seventh week in a row, taxable fixed income ETFs witnessed net inflows, taking in $1.9 billion this last week. APs were net purchasers of government-Treasury ETFs (+$708 million), corporate investment-grade debt ETFs (+$669 million), and flexible ETFs (+$376 million) while being net redeemers of government-mortgage ETFs (-$111 million). iShares TIPS Bond ETF (TIP, +$607 million) and JPMorgan Ultra-Short Income ETF (JPST, +$334 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares 7-10 Year Treasury Bond ETF (IEF, -$888 million) and iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB, -$345 million) handed back the largest individual net redemptions for the week. For the twenty-eighth week in a row, municipal bond ETFs witnessed net inflows, taking in $202 million this week. iShares National Municipal Bond ETF (MUB, +$117 million) witnessed the largest draw of net new money of the municipal bond ETFs in the subgroup for the week.
Conventional Equity Funds
Conventional fund (ex-ETF) investors were net redeemers of equity funds for the eleventh consecutive week—withdrawing $2.8 billion. The macro-group recorded a market loss of 0.33% for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $3.1 billion, witnessed their eleventh consecutive weekly net outflows while experiencing a 0.44% market decline on average for the fund-flows week. Nondomestic equity funds—posting a 0.11% weekly loss on average—observed their ninth week of net inflows in ten, taking in $367 million. On the domestic equity side, fund investors shunned large-cap funds (-$2.5 billion) and small-cap funds (-$337 million). Investors on the nondomestic equity side were net purchasers of international equity funds (+$333 million) and global equity funds (but injecting just $34 million) for the week.
Conventional Fixed Income Funds
For the fifth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $4.1 billion this past week—while posting a 0.13% loss on average for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$1.7 billion), flexible funds (+$1.4 billion), and corporate high-yield funds (+$632 million) while being net redeemers of balanced funds (-$155 million). The municipal bond funds group posted a 0.05% loss on average during the week and witnessed its twenty-third straight week of net inflows, attracting $884 million this week. General & Insured Municipal Debt Funds (+$349 million) experienced the largest net inflows of the group, followed by High Yield Municipal Debt Funds (+$187 million).
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