Investors Add To US Stocks For 4th Straight Week

Investors are returning to the stock market, and it's looking like the shift may have staying power. For four consecutive weeks, mutual fund investors have added more money than they've withdrawn from funds buying U.S. stocks.

The last time there were four straight weeks of positive flows was in April, according to the Investment Company Institute.

The fund industry organization said on Wednesday that a net $1.4 billion was added to U.S. stock funds for the week ended Feb. 2. That was smaller than the net gains in each of the preceding three weeks.

Still, the four-week moving average, which smooths out week-to-week shifts, remains solidly positive at $2.9 billion per week. That could signal a recent shift in investor sentiment has become entrenched.

"We're seeing a buildup in confidence," said Matthew Lemieux, an analyst with fund tracker Lipper Inc. "We'll continue to see that, unless we see bad news about the economy."

Although recent economic data haven't been entirely positive, "there are no big bombs dropping," Lemieux said.

The stock market's recent gains also have fueled a shift in investor sentiment. The Dow Jones industrial average at its highest level in two and a half years.

Since the market meltdown in late 2008, investors have mostly been pulling their money out of U.S. stock funds, and shifting into bonds, or foreign stock funds. Before the meltdown it was typical for stock funds to take in twice as much money as bond funds in any given month.

Investors began shifting away from bonds in November, largely reflecting fears about the fiscal health of state and local governments. But the latest numbers show that flight is slowing.

A net $583 million was added to bond funds for the week. They've posted a net outflow for eight of the past 12 weeks. In the last four weeks there's been a weekly average net outflow of $454 million.

Most of that cash has been pulled from municipal bonds. Money has exited muni bond funds for 13 consecutive weeks, with a net $1.17 billion flowing out in the latest week. Taxable bond funds, including corporate bonds, have taken in more money for six straight weeks, with a net $1.75 billion added in the latest week.

Political unrest in Egypt has rattled many investors in the world's emerging markets. However, U.S. investors continued to add more than they withdrew from foreign stock funds in the latest week, with a net $346 million flowing in. Flows to that category have been positive for 22 straight weeks.