Investors pull most money this year from U.S. stock funds before earnings

NEW YORK (Reuters) - Investors pulled the most money from U.S. stock funds this year during the latest week, trimming risk ahead of the U.S. earnings season, while bond investors warmed up to corporate-debt funds, Investment Company Institute (ICI) data showed on Wednesday.

Stock funds based in the United States posted outflows of $5.8 billion during the week ended April 6, the largest net withdrawals for the funds since the week ended Dec. 30, according to the data.

The withdrawals were led by investors in funds focused on U.S. company shares, which bled $5.3 billion during the week, their sixth straight week of outflows, the ICI data showed.

Funds focused on international companies posted $555 million in outflows as investors pulled money from emerging-market funds for the fourth straight week, ICI said.

"Investor pessimism for domestic equities stems in part from low expectations for first quarter earnings season," said Todd Rosenbluth, director of mutual-fund research at S&P Global Market Intelligence. "Capital IQ consensus forecasts are for an 8 percent year-over-year decline."

By contrast, U.S.-based bond funds continued to benefit from increased optimism over corporate debt, taking in $6.7 billion altogether, according to ICI, a fund trade group.

Funds that buy bonds with the highest credit ratings took in $3.9 billion, their sixth straight week of inflows. Lower-credit, high-yield funds took in $734 million during the week after posting $473 million in outflows the week prior.

"With continued expectations for low U.S. interest rates, investors have sought out the more favorable yield of investment-grade corporate bonds," said Rosenbluth.

Yet safe-haven bond funds continued to record strong investor demand. Taxable government bond funds attracted $574 million, their 17th straight week of inflows. Municipal bond funds gathered $1.5 billion in new cash, their 27th consecutive week of inflows.

The following table shows estimated ICI flows for the past five weeks (all figures in millions of dollars):

4/6 3/30 3/23 3/16 3/9/2016

Total equity -5,841 -4,893 -2,158 -2,087 1,472

-Domestic -5,286 -3,736 -2,038 -1,528 -240

-World -555 -1,157 -120 -558 1,712

Hybrid 373 -2 1,774 225 1,406

Total bond 6,667 1,192 4,671 4,921 5,938

-Taxable 5,208 -207 3,087 3,858 4,906

-Municipal 1,459 1,399 1,584 1,063 1,032

Total 1,199 -3,704 4,286 3,060 8,816

(Reporting by Trevor Hunnicutt; Editing by Chris Reese)