US Stock Market: Equity funds see second straight week of outflows as investors turn cautious

U.S. equity funds recorded net outflows for a second consecutive week as rising bond yields and oil prices, fueled by renewed tensions in the Middle East, weighed on investor sentiment, although strong earnings from artificial intelligence-related companies helped limit the decline.

Investors withdrew a net $11.12 billion from U.S. equity funds in the week through Sept. 2, according to LSEG Lipper data cited by Reuters. That compared with net outflows of $22.72 billion in the previous week.

Bond yields and oil prices surged earlier in the week after the United States struck Iranian military targets near the Strait of Hormuz, while Tehran said it had targeted U.S. assets across the region, adding to concerns over inflation and the broader economic outlook.


Strong results from Nvidia and Dell Technologies nevertheless provided some support for equities, signaling that robust spending on artificial intelligence infrastructure and related investments remained intact, as per a report by Reuters.

U.S. large-cap equity funds recorded net outflows of $7.52 billion, although the pace of withdrawals eased sharply from $24.73 billion in the previous week. Mid-cap funds registered outflows of $572 million, while small-cap funds saw $1.83 billion pulled out.

Sector-focused funds reported net selling of $3.48 billion during the week, led by technology, financial and industrial funds. Technology funds recorded withdrawals of $1.39 billion, followed by financial funds at $1.31 billion and industrial funds at $620 million.

Flows into U.S. bond funds fell to a five-week low of $4.27 billion. Short-to-intermediate government and Treasury funds remained in demand, attracting $4.53 billion during the week.

Short-to-intermediate investment-grade funds drew $1.53 billion, while loan participation funds attracted another $990 million, according to LSEG Lipper data cited by the report.

Investors continued to favor cash-like assets amid market uncertainty. Money market funds attracted nearly $48.76 billion during the week, their strongest weekly inflow in four weeks.

The fund-flow data highlighted a cautious shift among investors as higher yields and geopolitical risks encouraged greater allocations to safer, more liquid assets, even as continued strength in AI-related corporate earnings supported parts of the equity market.