(Reuters) - U.S. investors reduced holdings in equity funds, shifting to money market funds amid caution before key payroll reports, as a stock market rally eased and they awaited further evidence to support expectations of substantial Federal Reserve rate cuts.
They purchased about $56.92 billion worth of U.S. money market funds in their biggest weekly net buying since November 29, while exiting about $5.54 billion worth of equity funds, data from LSEG showed.
U.S. unemployment data on Thursday indicated a still resilient U.S. labour market, tempering hopes of deep rate cuts by the Federal Reserve this year. The release of monthly U.S. payrolls figures later in the day would further influence expectations about the timing and pace of rate cuts.
After gaining for nine successive weeks, the S&P 500 has dipped about 1.7% in the first week of 2024 amid concerns that expectations for steep rate cuts might be premature.
Investors pulled out $687 million, $1.37 billion and $652 million, respectively from U.S. large-, mid-, and multi-cap funds. Small-cap funds remained in demand, attracting $1.32 billion in a fifth straight week of net buying. Among sector funds, the tech sector led outflows, losing $879 million in net selling, followed by $361 million and $214 million worth of outflows respectively from industrials and real estate sectors.
Conversely, U.S. bond funds experienced $4.44 billion worth of purchases, the first weekly inflow in six weeks.
US short/intermediate government & treasury funds received a significant sum of $3.25 billion as investors snapped an eight-weeks-long selling streak.
Short/intermediate investment-grade, and general domestic taxable fixed income funds also received about $1.75 billion and $614 million, respectively.