U.S. equity funds post weekly outflows as AI earnings caution builds
Investor appetite for U.S. stocks weakens in the week to October 28 as markets brace for earnings from major AI hyperscalers and scrutiny of their rising infrastructure spending. The shift ends a three-week run of inflows, while demand also rotates toward technology sector funds and selected areas of the bond market.
Highlights
- Investors withdrew a net $6.65 billion from U.S. equity funds in the week ended October 28, the first weekly outflow since October 7.
- U.S. technology sector funds posted $4.54 billion in inflows while financial and healthcare sector funds saw outflows of $713 million and $701 million, respectively.
- Money market funds had $47.66 billion in outflows compared to $14.97 billion in inflows the previous week, while U.S. bond funds attracted $2.04 billion.
Fund flows turn negative before hyperscaler results
As reported by Reuters, citing LSEG Lipper data, investors withdrew a net $6.65 billion from U.S. equity funds in the week ended October 28, the first weekly outflow since October 7. The move reflects growing caution before earnings from major AI hyperscalers, as investors weigh the cost of their expanding AI build-outs.U.S. large-cap funds recorded outflows of $3.8 billion, partly reversing inflows of $8.72 billion in the previous week. Investors also pulled $2.11 billion from mid-cap funds, $832 million from small-cap funds and $303 million from multi-cap funds.
Sectoral funds, however, attracted net inflows of $3.52 billion, the largest in three weeks. Technology funds led the gain with $4.54 billion in net purchases, while financial and healthcare sector funds posted outflows of $713 million and $701 million, respectively.
Bond demand recovers as cash funds see sharp withdrawals
U.S. bond funds drew in $2.04 billion after posting net sales of $969 million a week earlier, indicating a recovery in demand for fixed income even as equity sentiment softens. Municipal debt funds brought in $1.74 billion, general domestic taxable fixed-income funds took in $1.31 billion and inflation-protected funds added $1.08 billion.At the same time, short- to intermediate-term government and Treasury funds saw outflows of $2.48 billion, while short- to intermediate-term investment-grade funds lost $1.59 billion. Money market funds posted net outflows of $47.66 billion, reversing roughly $14.97 billion in inflows the previous week.
In our earlier article on the S&P 500’s tech-led decline, we explained how weakness in technology and semiconductor stocks, alongside concerns about the durability of AI investment and rising borrowing costs, dragged the index lower. We also noted the technical backdrop—trading below key short-term moving averages—and highlighted the key support/resistance levels shaping near-term risk sentiment.
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