U.S. Stock Funds Lose $7.33 Billion to Weekly Withdrawals

Investors pulled $7.33 billion from U.S. stock mutual funds last week, the most since the week of Sept. 1, while adding money to bond funds.

Funds investing in domestic equities saw withdrawals of $6.86 billion in the week ended June 15, the Washington-based Investment Company Institute said today in an e-mailed statement. International stock funds lost $463 million, and investors put $2.41 billion into taxable bond funds and $75 million into municipal funds.

U.S. mutual funds have lost $13.1 billion in the past two weeks, the most in nine months, and have seen eight straight weeks of net withdrawals. The Standard & Poor’s 500 Index, a benchmark for large U.S. Stocks, has fallen 5.6 percent from its high for the year on April 29 amid concern that Greece may default on its debt and that the U.S. economy is losing steam. The Federal Reserve lowered its growth forecast today, with policy makers saying the economy was recovering “somewhat more slowly than expected.”

“People are going defensive, they’re coming out of the markets,” Geoff Bobroff, a fund consultant in East Greenwich, Rhode Island, said in a telephone interview. “They’re not rushing to emerging markets, they’re not rushing to commodities. They’re reducing their risk or eliminating it as much as they can.”

Bobroff said he expects investor uncertainty to persist until after the Fed finishes its $600 billion bond-purchase program this month and unemployment numbers are released in July. The political battle over whether to raise the $14.3 trillion U.S. debt ceiling by Aug. 2 is also making investors jittery, he said.

“Until we get greater clarity, I can see why people have gone defensive or pulled in their horns, so to speak, until we see what ultimately may come out of all of this.”

To contact the reporters on this story: Charles Stein in Boston at cstein4@bloomberg.net; Laura Keeley in Boston at lkeeley1@bloomberg.net.

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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